Retirement, employment, and labor market adjustments to health and labor market shocks - the role of social insurance

• Applicant: Professor Dr. Peter Haan
• Subject Area: Economic Policy, Applied Economics
• Term: since 2026
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 567437431

The project aims to quantify how labor market and health shocks affect inequality and living standards for older workers in France and Germany, and to evaluate how social insurance systems mitigate these effects. As populations age and retirement ages increase, older workers face heightened vulnerability to these shocks, which can significantly impact their employment, earnings, and pension entitlements. The project's comparative approach leverages institutional similarities between France and Germany while examining differences in their social insurance systems designs. By analyzing how different social insurance designs address the challenges of health and labor market shocks for older workers, the research aims to provide policy recommendations for reducing inequalities in both working-age labor markets and retirement outcomes. First, we will examine how labor market shocks (transitions to unemployment) and health shocks (sick leave episodes) affect income trajectories of older workers. Using administrative data from both countries, we will analyze the distribution and correlation of these shocks, their short-term impact on employment and benefit take-up, and their long-term effects on pension income. Particular attention will be dedicated to the analysis of the interaction and correlation between those shocks, as experiencing one shock often increases vulnerability to subsequent shocks. Second, we will investigate behavioral responses to social insurance reforms, focusing on how changes in the generosity of pension systems, unemployment insurance (UI), and disability insurance (DI) affect individual decisions. We will analyze several reforms in both countries, including French pension reforms changing eligibility ages and benefit levels, German early retirement reforms for long-term contributors, interaction between UI and retirement in France, changes in German DI benefit generosity, and the elimination of occupational disability insurance in Germany. Finally, we will develop for each country a lifecycle model to evaluate distributional and welfare implications of different social security reforms. These models will incorporate insights from the earlier analyses, particularly regarding the correlation between health and labor market shocks and causal effects of policy reforms. This model will allow us to conduct for both countries counterfactual policy simulations and cross-country comparisons.

• DFG Programme: Research Grants
• International Connection: France
• Partner Organisation: Agence Nationale de la Recherche / The French National Research Agency
• Cooperation Partner: Maxime Tô, Ph.D.