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The Impact of Health on Individual Retirement Plans: a Panel Analysis comparing Selfreported versus Diagnostic Measures

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Abstract

Earlier studies have concluded that the use of self-reported health in retirement models is likely to yield an unreliable impact of health on retirement due to “justification bias”. A few recent studies based on younger cohorts approaching retirement age have found little support for this hypothesis. This paper adds fresh evidence to this debate by considering the effect of health on retirement plans in samples of older workers and retirees drawn from a Danish panel survey from 1997-2002 merged to longitudinal register data. Using a wide array of alternative health measures, we compare the role of subjectively versus objectively measured health as a determinant of retirement planning. We control for unobserved heterogeneity as well as account for endogeneity and measurement error of health in retirement, and estimate separate models for women as well as men. As in the more studies, justification bias turns out not to be important. Self-rated physical and mental health are important predictors of retirement planning, in fact more important than economic factors, both among men as well as women. At a disaggregated level, back problems and myalgia significantly hasten male retirement, while back problems, osteoporosis and depression are conditions that significantly affect retirement among women. Retirement planning is in general unaffected by being hospitalised for a serious condition. Looking at health changes strengthens the conclusion that health is an important factor in retirement planning. In fact, health shocks seem to increase the propensity to retire earlier. However, health seems to be less important for retirement planning in Denmark compared to the US.

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  • Larsen, Mona & Datta Gupta, Nabanita, 2004. "The Impact of Health on Individual Retirement Plans: a Panel Analysis comparing Selfreported versus Diagnostic Measures," Working Papers 04-7, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2004_007
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    File URL: http://www.hha.dk/nat/wper/04-7_mlndg.pdf
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    References listed on IDEAS

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    1. Dwyer, Debra Sabatini & Mitchell, Olivia S., 1999. "Health problems as determinants of retirement: Are self-rated measures endogenous?," Journal of Health Economics, Elsevier, vol. 18(2), pages 173-193, April.
    2. 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.
    3. Mitchell, Olivia S & Fields, Gary S, 1984. "The Economics of Retirement Behavior," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 84-105, January.
    4. Debra S. Dwyer & Jianting Hu, "undated". "Retirement Expectations and Realizations: The Role of Health Shocks and Economic Factors," Pension Research Council Working Papers 98-18, Wharton School Pension Research Council, University of Pennsylvania.
    5. Kathleen McGarry, 2004. "Health and Retirement: Do Changes in Health Affect Retirement Expectations?," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
    6. Hugo Benítez-Silva & Moshe Buchinsky & Hiu Man Chan & Sofia Cheidvasser & John Rust, 2004. "How large is the bias in self-reported disability?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 649-670.
    7. 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.
    8. Gloria J. Bazzoli, 1985. "The Early Retirement Decision: New Empirical Evidence on the Influence of Health," Journal of Human Resources, University of Wisconsin Press, vol. 20(2), pages 214-234.
    9. Kathryn H. Anderson & Richard V. Burkhauser, 1985. "The Retirement-Health Nexus: A New Measure of an Old Puzzle," Journal of Human Resources, University of Wisconsin Press, vol. 20(3), pages 315-330.
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    Cited by:

    1. Hendrik Jurges, 2008. "Self-assessed health, reference levels and mortality," Applied Economics, Taylor & Francis Journals, vol. 40(5), pages 569-582.
    2. Barbara Berkel, 2006. "Retirement Age and Preretirement in German Administrative Data," MEA discussion paper series 06107, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    3. Hostenkamp, Gisela & Stolpe, Michael, 2008. "The social costs of health-related early retirement in Germany: Evidence from the German Socio-economic panel," Kiel Working Papers 1415, Kiel Institute for the World Economy (IfW).
    4. Hostenkamp, Gisela & Stolpe, Michael, 2006. "The health gradient and early retirement: Evidence from the German Socio-economic Panel," Kiel Working Papers 1305, Kiel Institute for the World Economy (IfW).
    5. Nabanita Datta Gupta & Mona Larsen, 2010. "The impact of health on individual retirement plans: self-reported versus diagnostic measures," Health Economics, John Wiley & Sons, Ltd., vol. 19(7), pages 792-813.

    More about this item

    Keywords

    Government Policy; Regulation; Public Health;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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