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Health Status and Labour Force Status of Older Working-Age Australian Men

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  • Lixin Cai

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Guyonne Kalb

    () (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

The trend of declining labour force participation by older working-age men, combined with an ageing population, has led many industrialised nations to develop policies encouraging older male workers to remain in the labour force. A better understanding of how an individual’s health influences the labour force participation decision among this group of workers would facilitate the development of effective policies. The current research uses the Household, Income and Labour Dynamics in Australia (HILDA) survey to investigate the issue. The longitudinal nature of the three-wave HILDA data, which are currently available, allows for a better control for unobserved heterogeneity than was possible with earlier data. Therefore, more efficient estimates of the direct health effects on labour force participation can be obtained than in a cross-sectional analysis. Unobserved factors are likely to affect both health and labour force status, therefore we estimate a model that takes the correlation between the two error terms in the health and labour force status equations into account. The results show that controlling for unobserved heterogeneity and the correlation between the two equations is important. That is, the estimated variances of the unobserved heterogeneity terms are significantly different from zero in both equations and the two error terms are correlated. Any restriction on the correlation between the two equations appears to lead to underestimation of the direct health effects.

Suggested Citation

  • Lixin Cai & Guyonne Kalb, 2005. "Health Status and Labour Force Status of Older Working-Age Australian Men," Melbourne Institute Working Paper Series wp2005n09, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2005n09
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Diana Warren, 2008. "Retirement Expectations and Labour Force Transitions: The Experience of the Baby Boomer Generation," Melbourne Institute Working Paper Series wp2008n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Diana Warren & Umut Oguzoglu, 2010. "Retirement in Australia: A Closer Look at the Financial Incentives," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(4), pages 357-375, December.
    4. Cobb-Clark, Deborah A. & Stillman, Steven, 2006. "The Retirement Expectations of Middle-Aged Individuals," IZA Discussion Papers 2449, Institute for the Study of Labor (IZA).
    5. Eric Delattre & Richard Moussa & Mareva Sabatier, 2015. "Health condition and job status interactions: Econometric evidence of causality from a French longitudinal survey," THEMA Working Papers 2015-19, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    6. Jeff Borland, 2011. "The Australian Labour Market in the 2000s: The Quiet Decade," RBA Annual Conference Volume,in: Hugo Gerard & Jonathan Kearns (ed.), The Australian Economy in the 2000s Reserve Bank of Australia.
    7. Emma Gorman & Grant M Scobie & Andy Towers, 2012. "Health and Retirement of Older New Zealanders," Treasury Working Paper Series 12/02, New Zealand Treasury.

    More about this item

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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