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Healthy, Wealthy and Working: Retirement Decisions of Older New Zealanders

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  • James Enright
  • Grant M Scobie

    ()
    (The Treasury)

Abstract

Health status is an important element in the decision to continue working or retire among older workers. Given the demographic projections for the next four decades, there will be increasing opportunities for older workers to remain in the workforce. However, an individual’s decision is likely to be influenced by both their health status and their accumulated wealth. This study analyses the influence of health and wealth on the decision to participate in the labour force amongst older New Zealanders, aged 55 to 70. It is based on the first wave of data collected in a longitudinal survey of Health, Work and Retirement conducted by researchers at Massey University. The study employs a range of measures of health including the results from the international Short Form (SF36), self-reported health status and the prevalence of chronic illness. Regardless of the measures tested, a significant reduction in labour force participation is associated with poorer health status. It is widely recognised that health status itself may partly be determined by labour market characteristics. Attempts to deal with this statistically were not successful. Perhaps surprisingly, wealth did not appear to be strongly related to the decision to retire. A marked fall in participation is associated with the receipt of New Zealand Superannuation at age 65, arguably masking the effect of privately held forms of retirement wealth. The paper reports associations between health, wealth and retirement which do not necessarily constitute evidence of causality.

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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 10/02.

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Length: 116
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:nzt:nztwps:10/02

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Keywords: Health; Wealth; Labour Supply; Retirement; New Zealand;

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References

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  1. Lixin Cai & Guyonne Kalb, 2004. "Health Status and Labour Force Participation: Evidence from the HILDA Data," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2004n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  2. Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," NBER Working Papers 12554, National Bureau of Economic Research, Inc.
  3. 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, Elsevier, vol. 6(2), pages 179-202, June.
  4. James Banks & Sarah Smith, 2006. "Retirement in the UK," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 22(1), pages 40-56, Spring.
  5. Deborah A. Cobb-Clark & Steve Stillman, 2006. "The Retirement Expectations of Middle-Aged Individuals," CEPR Discussion Papers, Centre for Economic Policy Research, Research School of Economics, Australian National University 540, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  6. David Love & Paul A. Smith, 2008. "Does Health Affect Portfolio Choice?," Department of Economics Working Papers, Department of Economics, Williams College 2008-11, Department of Economics, Williams College.
  7. Katherine Henderson & Grant M. Scobie, 2009. "Household Debt in New Zealand," Treasury Working Paper Series, New Zealand Treasury 09/03, New Zealand Treasury.
  8. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
  9. Dhaval Dave & R. Inas Rashad & Jasmina Spasojevic, 2008. "The Effects of Retirement on Physical and Mental Health Outcomes," Southern Economic Journal, Southern Economic Association, Southern Economic Association, vol. 75(2), pages 497-523, October.
  10. Richard Disney & Carl Emmerson & Matthew Wakefield, 2003. "Ill health and retirement in Britain: a panel data based analysis," IFS Working Papers, Institute for Fiscal Studies W03/02, Institute for Fiscal Studies.
  11. Debra Sabatini Dwyer & Olivia S. Mitchell, 1998. "Health Problems as Determinants of Retirement: Are Self-Rated Measures Endogenous?," NBER Working Papers 6503, National Bureau of Economic Research, Inc.
  12. Kathryn H. Anderson & Richard V. Burkhauser, 1985. "The Retirement-Health Nexus: A New Measure of an Old Puzzle," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 20(3), pages 315-330.
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  14. Michael Baker & Mark Stabile & Catherine Deri, 2004. "What Do Self-Reported, Objective, Measures of Health Measure?," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 39(4).
  15. repec:bla:restud:v:72:y:2005:i:2:p:395-427 is not listed on IDEAS
  16. Lixin Cai, 2007. "The Relationship between Health and Labour Force Participation: Evidence from a Panel Data Simultaneous Equation Model," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2007n01, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  17. Lixin Cai & Guyonne Kalb, 2006. "Health status and labour force participation: evidence from Australia," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(3), pages 241-261.
  18. Anderson, Kathryn H. & Burkhauser, Richard V., 1984. "The importance of the measure of health in empirical estimates of the labor supply of older men," Economics Letters, Elsevier, Elsevier, vol. 16(3-4), pages 375-380.
  19. Ettner, Susan L., 1996. "New evidence on the relationship between income and health," Journal of Health Economics, Elsevier, Elsevier, vol. 15(1), pages 67-85, February.
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Cited by:
  1. Emma Gorman & Grant M Scobie & Andy Towers, 2012. "Health and Retirement of Older New Zealanders," Treasury Working Paper Series, New Zealand Treasury 12/02, New Zealand Treasury.

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