Institutional rules, labour demand and retirement through disability programme participation

We use matched employer-employee data from Finland to model transitions out of work into sick leave and disability retirement. To identify the role of institutional factors we exploit reforms that changed medical requirements for disability pension eligibility and experience-rated employer contributions. We find that transitions to sick leave and disability pension benefits are relatively rare in growing establishments, but rather common in establishments with a high degree of excess worker turnover. We also show that transitions to disability retirement depend on the stringency of medical screening and the degree of experience rating applied to the employer.