Premium
THE IMPACT OF HEALTH CHANGES ON LABOR SUPPLY: EVIDENCE FROM MERGED DATA ON INDIVIDUAL OBJECTIVE MEDICAL DIAGNOSIS CODES AND EARLY RETIREMENT BEHAVIOR
Author(s) -
Christensen Bent Jesper,
KallestrupLamb Malene
Publication year - 2012
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.2811
Subject(s) - unemployment , duration (music) , health and retirement study , proxy (statistics) , baseline (sea) , economics , demographic economics , actuarial science , mental health , labour economics , medicine , gerontology , psychiatry , art , oceanography , literature , geology , computer science , economic growth , machine learning
The justification bias in the estimated impact of health shocks on retirement is mitigated by using objective health measures from a large, register‐based longitudinal data set including medical diagnosis codes, along with labor market status, financial, and socio‐economic variables. The duration until retirement is modeled using single and competing risk specifications, observed and unobserved heterogeneity, and flexible baseline hazards. Wealth is used as a proxy for elapsed duration to mitigate the potential selection bias stemming from conditioning on initial participation. The competing risk specification distinguishes complete multiperiod routes to retirement, such as unemployment followed by early retirement. A result on comparison of coefficients across all states is offered. The empirical results indicate a strong impact of health changes on retirement and hence a large potential for public policy measures intended to retain older workers longer in the labor force. Disability responds more to health shocks than early retirement, especially to diseases of the circulatory, respiratory, and musculoskeletal systems, as well as mental and behavioral disorders. Some unemployment spells followed by early retirement appear voluntary and spurred by life style diseases. Copyright © 2012 John Wiley & Sons, Ltd.