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Subjective Health Assessments and Active Labor Market Participation of Older Men: Evidence from a Semiparametric Binary Choice Model with Nonadditive Correlated Individual-specific Effects

  • Jürgen Maurer

    (Institute of Health Economics and Management and Faculty of Business and Economics, University of Lausanne)

  • Roger Klein

    (Rutgers University)

  • Francis Vella

    (Georgetown University)

We use panel data from the U.S. Health and Retirement Study, 1992–2002, to estimate the effect of self-assessed health limitations on the active labor market participation of older men. Self-assessments of health are likely to be endogenous to labor supply due to justification bias and individual-specific heterogeneity in subjective evaluations. We address both concerns. We propose a semiparametric binary choice procedure that incorporates nonadditive correlated individual-specific effects. Our estimation strategy identifies and estimates the average partial effects of health and functioning on labor market participation. The results indicate that poor health plays a major role in labor market exit decisions. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 93 (2011)
Issue (Month): 3 (August)
Pages: 764-774

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Handle: RePEc:tpr:restat:v:93:y:2011:i:3:p:764-774
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