We estimate the impact of employer-provided retiree health insurance on the rate at which men aged 51-62 enter and exit the labor force and switch jobs. The models estimated are an approximation of the employment decision rules implied by a dynamic stochastic model of employment behavior of older individuals. We use data from the Health and Retirement Survey (HRS), which contains more detailed and accurate measures of retiree health insurance than those used in most previous studies. The results show that availability of employer-provided retiree health insurance (EPRHI) increases the rate of exit from employment by two percentage points per year on average if the individual shares the cost of the insurance coverage with the firm, and by six percentage points if the firm pays the entire cost. The impact of EPRHI on the annual rate of labor force exit increases with age, reaching nine percentage points by age 61. These are larger than the effects estimated in previous studies. The accurate and detailed health insurance measures available in the HRS help account for the larger effects found here. Controlling for unobserved heterogeneity, a possibility not accounted for in previous studies, also has a substantial impact on the estimates.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5948.
Length: Date of creation: Feb 1997 Date of revision: Handle: RePEc:nbr:nberwo:5948
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Find related papers by JEL classification: J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies I1 - Health, Education, and Welfare - - Health
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Robin L. Lumsdaine & James H. Stock & David A. Wise, 1996.
"Why Are Retirement Rates So High at Age 65?,"
NBER Chapters,
in: Advances in the Economics of Aging, pages 61-82
National Bureau of Economic Research, Inc.
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