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The Effects of Health and Health Shocks on Hours Worked

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  • Cai, Lixin

    () (NILS, Flinders University)

  • Mavromaras, Kostas G.

    () (NILS, Flinders University)

  • Oguzoglu, Umut

    () (University of Manitoba)

Abstract

We investigate the impact of health on working hours in recognition of the fact that leaving the labour market due to persistently low levels of health stock or due to new health shocks, is only one of the possibilities open to employees. We use the first six waves of the HILDA survey to estimate the joint effect of health status and health shocks on working hours using a dynamic random effects Tobit model of working hours to account for zero working hours. We follow Heckman (1981) and approximate the unknown initial conditions with a static equation that utilizes information from the first wave of the data. Predicted individual health stocks are used to ameliorate the possible effects of measurement error and endogeneity. We conclude that overall lower health status results in lower working hours and that health shocks lead to further reductions in working hours when they occur. Estimation results show that the model performs well in separating the time-persistent effect of health stock (health status) and the potentially more transient health shocks on working hours.

Suggested Citation

  • Cai, Lixin & Mavromaras, Kostas G. & Oguzoglu, Umut, 2008. "The Effects of Health and Health Shocks on Hours Worked," IZA Discussion Papers 3496, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3496
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    References listed on IDEAS

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    1. Haardt, David, 2006. "Transitions out of and back to employment among older men and women in the UK," ISER Working Paper Series 2006-20, Institute for Social and Economic Research.
    2. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
    3. Nicole Watson & Mark Wooden, 2004. "The HILDA Survey Four Years On," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(3), pages 343-349, September.
    4. Mark Wooden & Robert Drago, 2007. "The Changing Distribution of Working Hours in Australia," Melbourne Institute Working Paper Series wp2007n19, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    5. 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.
    6. Gerdtham, U. -G. & Johannesson, M. & Lundberg, L. & Isacson, D., 1999. "A note on validating Wagstaff and van Doorslaer's health measure in the analysis of inequalities in health," Journal of Health Economics, Elsevier, vol. 18(1), pages 117-124, January.
    7. 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.
    8. Umut Oguzoglu, 2010. "Dynamics of work limitation and work in Australia," Health Economics, John Wiley & Sons, Ltd., vol. 19(6), pages 656-669.
    9. Brenda Gannon & Brian Nolan, 2004. "Disability and Labour Force Participation in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 35(2), pages 135-155.
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    Citations

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    Cited by:

    1. Jones, Melanie K & Mavromaras, Kostas & Sloane, Peter J & Wei, Zhang (NILS), 2011. "NILS Working paper no 176. Disability and job mismatches in the Australian labour market," NILS Working Papers 26074, National Institute of Labour Studies.
    2. Grossmann, Volker, 2013. "Do cost-sharing and entry deregulation curb pharmaceutical innovation?," Journal of Health Economics, Elsevier, vol. 32(5), pages 881-894.
    3. Volker Grossmann & Holger Strulik, 2015. "Optimal Social Insurance and Health Inequality," CESifo Working Paper Series 5604, CESifo Group Munich.
    4. Mavromaras, Kostas G. & Sloane, Peter J. & Wei, Zhang, 2011. "Disability and Job Mismatches in the Australian Labour Market," IZA Discussion Papers 6152, Institute for the Study of Labor (IZA).
    5. Mavromaras, Kostas & Polidano, Cain, 2011. "NILS Working paper no 165. Improving the employment rates of people with disabilities through vocational education," NILS Working Papers 26068, National Institute of Labour Studies.
    6. Fernández-Val, Iván & Savchenko, Yevgeniya & Vella, Francis, 2013. "Evaluating the Role of Individual Specific Heterogeneity in the Relationship Between Subjective Health Assessments and Income," IZA Discussion Papers 7651, Institute for the Study of Labor (IZA).
    7. Manoj K. Pandey, 2013. "Elderly's Health Shocks and Household's Ex-ante Poverty in India," ASARC Working Papers 2013-01, The Australian National University, Australia South Asia Research Centre.
    8. Mavromaras, Kostas G. & Polidano, Cain, 2011. "Improving the Employment Rates of People with Disabilities through Vocational Education," IZA Discussion Papers 5548, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    working hours; health; health shocks; Tobit estimation;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • I10 - Health, Education, and Welfare - - Health - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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