Estimating the Stochastic Sickness Effect on Employment, Worktime and Saving Decisions
AbstractThis 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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Bibliographic InfoPaper provided by South Dakota State University, Department of Economics in its series SDSU Working Papers in Progress with number 32009.
Length: 20 pages
Date of creation: Sep 2009
Date of revision:
Health; Uncertainty; Labor Supply; Saving;
Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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