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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
Jürgen Maurer () (MEA, University of Mannheim)
Roger Klein () (Rutgers University)
Francis Vella () (Georgetown University and IZA)
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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Publisher 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
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Handle: RePEc:iza:izadps:dp3257

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

Find related papers by JEL classification:
I10 - Health, Education, and Welfare - - Health - - - General
J10 - Labor and Demographic Economics - - Demographic Economics - - - General
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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References listed on IDEAS
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  1. Janet Currie & Brigitte C. Madrian, 1998. "Health, Health Insurance and the Labor Market," JCPR Working Papers 27, Northwestern University/University of Chicago Joint Center for Poverty Research.
    Other versions:
  2. Joseph G. Altonji & Rosa L. Matzkin, 2005. "Cross Section and Panel Data Estimators for Nonseparable Models with Endogenous Regressors," Econometrica, Econometric Society, vol. 73(4), pages 1053-1102, 07. [Downloadable!] (restricted)
  3. Dwyer, Debra Sabatini & Mitchell, Olivia S., 1999. "Health problems as determinants of retirement: Are self-rated measures endogenous?," Journal of Health Economics, Elsevier, vol. 18(2), pages 173-193, April. [Downloadable!] (restricted)
    Other versions:
  4. 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). [Downloadable!] (restricted)
    Other versions:
  5. Alan L. Gustman & Thomas L. Steinmeier, 2000. "Retirement Outcomes in the Health and Retirement Study," NBER Working Papers 7588, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Disney, Richard & Emmerson, Carl & Wakefield, Matthew, 2006. "Ill health and retirement in Britain: A panel data-based analysis," Journal of Health Economics, Elsevier, vol. 25(4), pages 621-649, July. [Downloadable!] (restricted)
    Other versions:
  7. Rena M. Conti & Ernst R. Berndt & Richard G. Frank, 2006. "Early Retirement and Public Disability Insurance Applications: Exploring the Impact of Depression," NBER Working Papers 12237, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier. [Downloadable!] (restricted)
  9. Courtney C. Coile, 2004. "Health Shocks and Couples' Labor Supply Decisions," NBER Working Papers 10810, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Richard W. Blundell & James L. Powell, 2004. "Endogeneity in Semiparametric Binary Response Models," Review of Economic Studies, Blackwell Publishing, vol. 71, pages 655-679, 07. [Downloadable!] (restricted)
    Other versions:
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