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Estimating the Stochastic Sickness Effect on Employment, Worktime and Saving Decisions

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  • Chiang-Ming Chen

    ()
    (Department of Economics, National Chi Nan University, Nantou, Taiwan)

  • Kuo-Liang Chang

    (Department of Economics, South Dakota State University)

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    Abstract

    This paper aims to study labor supply and saving decisions as a result of health uncertainty. O’Donnell (1995) suggested a theoretical positive relationship between working hours (or saving rate) and the perceived health uncertainty. That is, for risk-averse individuals, there exists a precaution motion to work harder and save more when facing the uncertainty for the health condition. We test this hypothetical relationship by applying the 2003-2005 data from the Panel Study of Family Dynamics (PSFD) in Taiwan. Following Hughes and Maguire’s approach (2003), our estimation result indicates that a stochastic sickness has positive effects on the decisions of working time and saving rate.

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    File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/healthuncertaintyandlaborinput200803.pdf
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    Bibliographic Info

    Paper provided by South Dakota State University, Department of Economics in its series SDSU Working Papers in Progress with number 32009.

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    Length: 20 pages
    Date of creation: Sep 2009
    Date of revision:
    Handle: RePEc:sda:workpa:32009

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    Keywords: Health; Uncertainty; Labor Supply; Saving;

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