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Life-Cycle Labor Supply and Physiological Aging across Countries

Author

Listed:
  • Hansen, Casper Worm
  • Dalgaard, Carl-Johan
  • Strulik, Holger

Abstract

We construct a cohort-based frailty index for 181 countries over the period 1990-2019. We use this macro measure of physiological aging to estimate the impact of deteriorating health on labor force participation. Our three-dimensional panel framework, in which the unit of observation is a cohort in a given country at a given age, allows us to control for a range of unobserved factors. Our identification strategy further exploits a compensating law of physiological aging to account for reverse causality. We find a negative effect of physiological aging on labor market participation: a one percent increase in the frailty index leads to a reduction of labor force participation of about 0.6 percentage points. Since health deficits (in the frailty index) are accumulated at a rate of about 3 percent per year of life, almost all of the age-related decline in labor force participation can be motivated by deteriorating health.

Suggested Citation

  • Hansen, Casper Worm & Dalgaard, Carl-Johan & Strulik, Holger, 2022. "Life-Cycle Labor Supply and Physiological Aging across Countries," CEPR Discussion Papers 17713, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17713
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    More about this item

    Keywords

    Health;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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