Health Shocks and Retirement:

We investigate the effect of an acute health shock on retirement among elderly male workers in Denmark, 1991-1999, and in particular whether various welfare state programs and institutions impinge on the retirement effect. The results show that an acute health event increases the retirement chances of elderly male workers by 8% in Denmark and that this increase in the baseline retirement probability is not affected by eligibility to early exit programs and persist even after accounting for selection due to take-up of disability pension. Neither is it affected by the relatively long duration of sickness benefits in Denmark nor by the promotion of corporate social responsibility initiatives since the mid-1990s. In the late 1990s, however, the retirement rate following a health shock is reduced to 3% with the introduction of the subsidized employment program (fleksjob) but this effect is not strongly significant. For the most part, the retirement effect following a health shock seems to be immune to the availability of a multitude of government programs for older workers in Denmark.