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Health, Economic Resources and the Work Decisions of Older Men

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Author Info
John Bound (University of Michigan)
Todd Stinebrickner (University of Western Ontario)
Timothy Waidmann (The Urban Institute)

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Abstract

In this paper, we specify a dynamic programming model that addresses the interplay among health, financial resources, and the labor market behavior of men in the later part of their working lives. Unlike previous work which has typically used self reported health or disability status as a proxy for health status, we model health as a latent variable, using self reported disability status as an indicator of this latent construct. Our model is explicitly designed to account for the possibility that the reporting of disability may be endogenous to the labor market behavior we are studying. The model is estimated using data from the Health and Retirement Study. We compare results based on our model to results based on models that treat health in the typical way, and find large differences in the estimated effect of health on behavior. While estimates based on our model suggest that health has a large impact on behavior, the estimates suggest a substantially smaller role for health than we find when using standard techniques. We use our model to simulate the impact on behavior of raising the normal retirement age, eliminating early retirement altogether and eliminating the Social Security Disability Insurance program.

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Publisher Info
Paper provided by University of Western Ontario, RBC Financial Group Economic Policy Research Institute in its series University of Western Ontario, RBC Financial Group Economic Policy Research Institute Working Papers with number 20076.

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Date of creation: 2007
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Handle: RePEc:uwo:epuwoc:20076

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Postal: RBC Financial Group Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85228
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Related research
Keywords: retirement behavior; disability insurance; social security; dynamic programming; latent Variable models;

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Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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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.:
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Cited by:
(explanations, 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.)

  1. Richard Burkhauser & John Cawley, 2006. "The Importance of Objective Health Measures in Predicting Early Receipt of Social Security Benefits: The Case of Fatness," Working Papers wp148, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  2. Erik Meijer & Arie Kapteyn & Tatiana Andreyeva, 2008. "Health Indexes and Retirement Modeling in International Comparisons," Working Papers 614, RAND Corporation Publications Department. [Downloadable!]
  3. Eric French & John Bailey Jones, 2001. "The effects of health insurance and self-insurance on retirement behavior," Working Paper Series WP-01-19, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
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