Health is strongly associated with labor force participation, but the institutional mechanisms that explain this association remain unknown. This paper examines the impact of life-course illness on labor market exit based on reconstructed life histories of adult health and employment. We use newly collected data from the Retrospective Survey of Health, Ageing and Retirement in Europe (SHARELIFE), linked to data on institutions for the period 1960-2009 in 13 countries. We find that periods of illness at any point during the life-course are associated with earlier exit from the labor market, but this association differs across countries with different institutions. While the level of investment in public health does not explain cross-country variations, higher investments in curative health care are associated with weaker effects of long-term illness on work duration. We find that higher unemployment benefits may work as incentive towards earlier exit from the labor market due to illness
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