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Ill health and retirement in Britain: a panel data based analysis

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  • Richard Disney

    ()
    (Institute for Fiscal Studies and University of Nottingham)

  • Carl Emmerson

    ()
    (Institute for Fiscal Studies)

  • Matthew Wakefield

    ()
    (Institute for Fiscal Studies and University of Bologna)

Abstract

We examine the role of ill-health in retirement decisions in Britain, using the first eight waves of the British Household Panel Survey (1991-98). As self-reported health status is likely to be endogenous to the retirement decision, we instrument self-reported health by a constructed Ѩealth stock' measure using a set of health indicator variables and personal characteristics, as suggested by Bound et al (1999). Using both linear and non-linear fixed effects estimators, we show that adverse individual health shocks are an important predictor of individual retirement behaviour. We compare the impact of our constructed health measure on economic activity with that arising from the use of other health variables in the data set. We also examine the impact of the 1995 reform of disability benefits on the retirement decision.

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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W03/02.

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Length: 28 pp
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:ifs:ifsewp:03/02

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  1. Richard Blundell & Costas Meghir & Sarah Smith, 2002. "Pension Incentives and the Pattern of Early Retirement," Economic Journal, Royal Economic Society, vol. 112(478), pages C153-C170, March.
  2. Kathryn Anderson & Richard V. Burkhauser & Joseph F. Quinn, 1986. "Do retirement dreams come true? The effect of unanticipated events on retirement plans," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 39(4), pages 518-526, July.
  3. Meghir, Costas & Whitehouse, Edward, 1997. "Labour market transitions and retirement of men in the UK," Journal of Econometrics, Elsevier, vol. 79(2), pages 327-354, August.
  4. Kerkhofs, Marcel & Lindeboom, Maarten & Theeuwes, Jules, 1998. "Retirement, financial incentives and health," Serie Research Memoranda 0042, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  5. Bound, John & Schoenbaum, Michael & Stinebrickner, Todd R. & Waidmann, Timothy, 1999. "The dynamic effects of health on the labor force transitions of older workers," Labour Economics, Elsevier, vol. 6(2), pages 179-202, June.
  6. Blundell, Richard & Johnson, Paul, 1998. "Pensions and Labor-Market Participation in the United Kingdom," American Economic Review, American Economic Association, vol. 88(2), pages 168-72, May.
  7. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  8. Debra S. Dwyer & Olivia S. Mitchell, . "Health Problems as Determinants of Retirement: Are Self-Rated Measures Endogenous?," Pension Research Council Working Papers 98-7, Wharton School Pension Research Council, University of Pennsylvania.
  9. Joseph F. Quinn & Richard V. Burkhauser & Daniel A. Myers, 1990. "Passing the Torch: The Influence of Economic Incentives on Work and Retirement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number pt.
  10. John Bound, 1991. "Self-Reported Versus Objective Measures of Health in Retirement Models," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 106-138.
  11. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  12. (*), Nigel Rice & Paul Contoyannis, 2001. "The impact of health on wages: Evidence from the British Household Panel Survey," Empirical Economics, Springer, vol. 26(4), pages 599-622.
  13. Richard Disney & Sarah Smith, 2002. "The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom," CeRP Working Papers 17, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  14. Zabalza, A. & Pissarides, C. & Barton, M., 1980. "Social security and the choice between full-time work, part-time work and retirement," Journal of Public Economics, Elsevier, vol. 14(2), pages 245-276, October.
  15. Sarah Tanner, 1998. "The dynamics of male retirement behaviour," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 175-196, May.
  16. Griliches, Zvi, 1974. "Errors in Variables and Other Unobservables," Econometrica, Econometric Society, vol. 42(6), pages 971-98, November.
  17. Steven Stern, 1989. "Measuring the Effect of Disability on Labor Force Participation," Journal of Human Resources, University of Wisconsin Press, vol. 24(3), pages 361-395.
  18. Michael Baker & Mark Stabile & Catherine Deri, 2004. "What Do Self-Reported, Objective, Measures of Health Measure?," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
  19. Raffaele Miniaci & Elena Stancanelli, 1998. "Microeconometric Analysis of the Retirement Decision: United Kingdom," OECD Economics Department Working Papers 206, OECD Publishing.
  20. Disney, Richard & Webb, Steven, 1991. "Why Are There So Many Long Term Sick in Britain?," Economic Journal, Royal Economic Society, vol. 101(405), pages 252-62, March.
  21. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
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