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Subjective Health Assessments and Active Labor Market Participation of Older Men: Evidence from a Semiparametric Binary Choice Model with Nonadditive Correlated Individual-Specific Effects

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Author Info

  • Maurer, Jürgen

    () (University of Lausanne)

  • Klein, Roger

    () (Rutgers University)

  • Vella, Francis

    () (Georgetown University)

Abstract

We use panel data from the US Health and Retirement Study 1992-2002 to estimate the effect of self-assessed health limitations on active labor market participation of men around retirement age. Self-assessments of health and functioning typically introduce an endogeneity bias when studying the effects of health on labor market participation. This results from justification bias, reflecting an individual’s tendency to provide answers which "justify" his labor market activity, and individual-specific heterogeneity in providing subjective evaluations. We address both concerns. We propose a semiparametric binary choice procedure which incorporates potentially nonadditive correlated individual-specific effects. Our estimation strategy identifies and estimates the average partial effects of health and functioning on labor market participation. The results indicate that poor health and functioning play a major role in the labor market exit decisions of older men.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3257.

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Length: 33 pages
Date of creation: Dec 2007
Date of revision:
Publication status: published in: Review of Economics and Statistics, 2011, 93 (3), 764 - 774
Handle: RePEc:iza:izadps:dp3257

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Keywords: health; retirement; nonadditive correlated effects; semiparametric estimation;

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References

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Cited by:
  1. Martin Huber & Michael Lechner & Conny Wunsch, 2009. "Does Leaving Welfare Improve Health? Evidence for Germany," University of St. Gallen Department of Economics working paper series 2009 2009-21, Department of Economics, University of St. Gallen.
  2. Stefanie Schurer, 2008. "Discrete Heterogeneity in the Impact of Health Shocks on Labour Market Outcomes," Melbourne Institute Working Paper Series wp2008n19, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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