IDEAS home Printed from https://ideas.repec.org/a/bla/obuest/v81y2019i1p123-145.html
   My bibliography  Save this article

What Do Wages Add to the Health‐Employment Nexus? Evidence from Older European Workers

Author

Listed:
  • Manuel Flores
  • Adriaan Kalwij

Abstract

The role of wages in the health‐employment nexus can be important for designing employment policies aimed at older workers with health limitations. We, therefore, estimate the direct effect of health on employment and hours worked and its indirect effect that is mediated through wages using individual‐level panel data from SHARE. The endogeneity of self‐reported health is controlled for by instrumenting it with severe health conditions in a correlated random effects model. For men, we find that the direct effects of health deterioration, as measured by a reduction in health from the 75th to the 50th percentile of the health distribution, are about a 20% point lower employment probability and about 171 fewer hours worked per year. The indirect health effects through wages work in the opposite directions as health positively affects wages and wages negatively affect employment and hours worked. The total effects of this health deterioration amount to a 12% point lower employment probability and 95 fewer hours worked per year. In particular our finding of a large direct health effect on employment suggests an instrumental role for policy aimed at accommodating workers with health limitations to keep them employed at older ages.

Suggested Citation

  • Manuel Flores & Adriaan Kalwij, 2019. "What Do Wages Add to the Health‐Employment Nexus? Evidence from Older European Workers," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 81(1), pages 123-145, February.
  • Handle: RePEc:bla:obuest:v:81:y:2019:i:1:p:123-145
    DOI: 10.1111/obes.12257
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/obes.12257
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Adriaan Kalwij & Arie Kapteyn & Klaas Vos, 2010. "Retirement of Older Workers and Employment of the Young," De Economist, Springer, vol. 158(4), pages 341-359, November.
    2. Mary C. Daly & John Bound, 1995. "Worker Adaptation and Employer Accommodation Following the Onset of a Health Impairment," NBER Working Papers 5169, National Bureau of Economic Research, Inc.
    3. Arie Kapteyn & James P. Smith & Arthur van Soest, 2007. "Vignettes and Self-Reports of Work Disability in the United States and the Netherlands," American Economic Review, American Economic Association, vol. 97(1), pages 461-473, March.
    4. Haveman, Robert & Wolfe, Barbara & Kreider, Brent & Stone, Mark, 1994. "Market work, wages, and men's health," Journal of Health Economics, Elsevier, vol. 13(2), pages 163-182, July.
    5. André Sapir, 2006. "Globalization and the Reform of European Social Models," Journal of Common Market Studies, Wiley Blackwell, vol. 44(2), pages 369-390, June.
    6. Ana Llena‐Nozal & Maarten Lindeboom & France Portrait, 2004. "The effect of work on mental health: does occupation matter?," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 1045-1062, October.
    7. Coe, Norma B. & Zamarro, Gema, 2011. "Retirement effects on health in Europe," Journal of Health Economics, Elsevier, vol. 30(1), pages 77-86, January.
    8. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    9. Adriaan Kalwij & Frederic Vermeulen, 2008. "Health and labour force participation of older people in Europe: What do objective health indicators add to the analysis?," Health Economics, John Wiley & Sons, Ltd., vol. 17(5), pages 619-638, May.
    10. Bonsang, Eric & Adam, Stéphane & Perelman, Sergio, 2012. "Does retirement affect cognitive functioning?," Journal of Health Economics, Elsevier, vol. 31(3), pages 490-501.
    11. 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, vol. 6(2), pages 179-202, June.
    12. Lixin Cai, 2009. "Effects of Health on Wages of Australian Men," The Economic Record, The Economic Society of Australia, vol. 85(270), pages 290-306, September.
    13. Robert Jäckle & Oliver Himmler, 2010. "Health and Wages: Panel Data Estimates Considering Selection and Endogeneity," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
    14. (*), Nigel Rice & Paul Contoyannis, 2001. "The impact of health on wages: Evidence from the British Household Panel Survey," Empirical Economics, Springer, vol. 26(4), pages 599-622.
    15. Crossley, Thomas F. & Kennedy, Steven, 2002. "The reliability of self-assessed health status," Journal of Health Economics, Elsevier, vol. 21(4), pages 643-658, July.
    16. Roger H. Gordon & Alan S. Blinder, 1980. "Market Wages, Reservation Wages, and Retirement Decisions," NBER Chapters, in: Econometric Studies in Public Finance, pages 277-308, National Bureau of Economic Research, Inc.
    17. David H. Autor & Mark G. Duggan, 2007. "Distinguishing Income from Substitution Effects in Disability Insurance," American Economic Review, American Economic Association, vol. 97(2), pages 119-124, May.
    18. Maarten Lindeboom & Marcel Kerkhofs, 2009. "Health and work of the elderly: subjective health measures, reporting errors and endogeneity in the relationship between health and work," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 1024-1046.
    19. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    20. Susann Rohwedder & Robert J. Willis, 2010. "Mental Retirement," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 119-138, Winter.
    21. John Bound, 1991. "Self-Reported Versus Objective Measures of Health in Retirement Models," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 106-138.
    22. Cai, Lixin, 2010. "The relationship between health and labour force participation: Evidence from a panel data simultaneous equation model," Labour Economics, Elsevier, vol. 17(1), pages 77-90, January.
    23. Disney, Richard & Emmerson, Carl & Wakefield, Matthew, 2006. "Ill health and retirement in Britain: A panel data-based analysis," Journal of Health Economics, Elsevier, vol. 25(4), pages 621-649, July.
    24. Lee, Lung-Fei, 1982. "Health and Wage: A Simultaneous Equation Model with Multiple Discrete Indicators," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(1), pages 199-221, February.
    25. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    26. David Roodman, 2009. "Estimating Fully Observed Recursive Mixed-Process Models with cmp," Working Papers 168, Center for Global Development.
    27. Richard V. Burkhauser & Mary C. Daly, 2012. "Social Security Disability Insurance: Time For Fundamental Change," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 31(2), pages 454-461, March.
    28. Steven Stern, 1989. "Measuring the Effect of Disability on Labor Force Participation," Journal of Human Resources, University of Wisconsin Press, vol. 24(3), pages 361-395.
    29. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    30. Erik Meijer & Arie Kapteyn & Tatiana Andreyeva, 2011. "Internationally comparable health indices," Health Economics, John Wiley & Sons, Ltd., vol. 20(5), pages 600-619, May.
    31. Sarah Brown & Jennifer Roberts & Karl Taylor, 2010. "Reservation wages, labour market participation and health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 501-529, July.
    32. Stephen E. Snyder & William N. Evans, 2006. "The Effect of Income on Mortality: Evidence from the Social Security Notch," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 482-495, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. #HEJC papers for September 2013
      by academichealtheconomists in The Academic Health Economists' Blog on 2013-09-01 04:01:38

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicola Ciccarelli & Arthur Soest, 2018. "Informal Caregiving, Employment Status and Work Hours of the 50+ Population in Europe," De Economist, Springer, vol. 166(3), pages 363-396, September.

    More about this item

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:81:y:2019:i:1:p:123-145. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery). General contact details of provider: http://edirc.repec.org/data/sfeixuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.