Labour force participation of the elderly in Europe: The importance of being healthy

In this paper we study labour force participation behaviour of individuals aged 50-64 in 11 European countries. The data are drawn from the new Survey of Health, Ageing and Retirement in Europe (SHARE). The empirical analysis shows that health is multi-dimensional, in the sense that di¤erent health indicators have theirown significant impact on individuals’ participation decisions. Health effects differ markedly between countries. A counterfactual exercise shows that improved health conditions may yield over 10 percentage points higher participation rates for men incountries like Austria, Germany and Spain, and for females in the Netherlands and Sweden. Moreover, we show that the declining health condition with age accounts considerably for the decline in participation rates with age.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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