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The Impact of Health on Individual Retirement Plans: a Panel Analysis comparing Selfreported versus Diagnostic Measures

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Author Info
Larsen, Mona () (Danish National Institute of Social Research)
Datta Gupta, Nabanita () (Department of Economics, Aarhus School of Business)

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Abstract

Earlier studies have concluded that the use of self-reported health in retirement models is likely to yield an unreliable

impact of health on retirement due to “justification bias”. A few recent studies based on younger cohorts approaching

retirement age have found little support for this hypothesis. This paper adds fresh evidence to this debate by considering

the effect of health on retirement plans in samples of older workers and retirees drawn from a Danish panel survey from

1997-2002 merged to longitudinal register data. Using a wide array of alternative health measures, we compare the role

of subjectively versus objectively measured health as a determinant of retirement planning. We control for unobserved

heterogeneity as well as account for endogeneity and measurement error of health in retirement, and estimate separate

models for women as well as men. As in the more studies, justification bias turns out not to be important. Self-rated

physical and mental health are important predictors of retirement planning, in fact more important than economic

factors, both among men as well as women. At a disaggregated level, back problems and myalgia significantly hasten

male retirement, while back problems, osteoporosis and depression are conditions that significantly affect retirement

among women. Retirement planning is in general unaffected by being hospitalised for a serious condition. Looking at

health changes strengthens the conclusion that health is an important factor in retirement planning. In fact, health shocks

seem to increase the propensity to retire earlier. However, health seems to be less important for retirement planning in

Denmark compared to the US.

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Publisher Info
Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 04-7.

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Length: 56 pages
Date of creation: 27 May 2004
Date of revision:
Handle: RePEc:hhs:aareco:2004_007

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Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx
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Related research
Keywords: Government Policy Regulation Public Health

Find related papers by JEL classification:
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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Cited by:
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  1. Barbara Berkel, 2006. "Retirement Age and Preretirement in German Administrative Data," MEA discussion paper series 06107, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  2. Gisela Hostenkamp & Michael Stolpe, 2006. "The Health Gradient and Early Retirement: Evidence from the German Socio-economic Panel," Kiel Working Papers 1305, Kiel Institute for the World Economy. [Downloadable!]
  3. Barbara Berkel, 2006. "Retirement Age and Preretirement in German Administrative Data," MEA discussion paper series 06107, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
  4. Gisela Hostenkamp & Michael Stolpe, 2008. "The Social Costs of Health-related Early Retirement in Germany: Evidence from the German Socio-economic Panel," Kiel Working Papers 1415, Kiel Institute for the World Economy. [Downloadable!]
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This page was last updated on 2008-9-25.

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