THE EFFECTS OF NATIONAL HEALTH INSURANCE ON RETIREMENT BEHAVIOR
May 27, 2008
Between 2006 and 2050, the projected percentage of worldwide population above the age of 60 will grow from 11 percent to 22 percent -- a dramatic increase. Aging populations and low fertility rates have brought a challenge to more and more countries as the growth in early retirement places an unsustainable burden on the younger generation. The growth in early retirement can be partially attributed to government policies, including universal health insurance.
Hsin-Ling Hsieh, an assistant professor of economics at Northern Michigan University, examined the effect of the 1995 implementation of National Health Insurance on retirement behavior in Taiwan. NHI provides universal health insurance coverage for all citizens of Taiwan, allowing even private workers to gain postretirement health insurance, says Hsieh.
The results of Hsieh's study demonstrate that NHI had significant effects on retirement among the elderly lacking an adequate, traditional "safety net." For example:
- NHI raised the conditional probability that a male, private sector worker over the age of 51 would retire by more than 60 percent.
- However, men with a stronger safety net in the form of adult sons were less responsive to NHI.
- The magnitude of support from adult children was a primary factor in the retirement decisions of parents after the implementation of NHI.
This innovative case study provides an opportunity to compare the empirical evidence from a Western country with that from an Asian country:
- In 1995, J. Gruber and B.C Madrian showed that one year of continuation of health insurance coverage raises the retirement hazard by 30 percent in the United States.
- Gruber and Madrian concluded that policies to provide universal health insurance coverage could lead to a large increase in the rate of early retirement and impact the financing of such policies.
Source: Hsin-Ling Hsieh, "Do Adult Children Matter? - The Effect of National Health Insurance on Retirement Behavior: Evidence from Taiwan," Contemporary Economic Policy, Vol. 26, No. 2, (April 2008).
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