Do reduced working hours for older workers have health consequences and prolong work careers?

Abstract

I examine the effects of reduced working hours on various health outcomes. I focus on individuals close to retirement and exploit a reform in part-time pension rules. Using detailed register data on health and job spells together with a difference-in-differences approach, I find that an earlier eligibility age for part-time pension program increased purchases of prescription drugs by approximately 1.0 percentage point over the following 6 years. In relative terms, this effect is small, around 2%, but is economically significant as drug purchases are largely subsidized by the state. However, looking at the long-term effects I do not find effects on mortality or severe health diagnoses. I also look at labour market exits and find that the reform did not reduce the risk of early withdrawal from the labour market.