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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 Individualspecific Effects

  • Jürgen Maurer

    ()

  • Roger Klein
  • Francis Vella

    (Munich Center for the Economics of Aging (MEA))

We use panel data from the US Health and Retirement Study 1992-2002 to estimate the effect of self-assessed health limitations on active labor market participation of men around retirement age. Self-assessments of health and functioning typically introduce an endogeneity bias when studying the effects of health on labor market participation. This results from justification bias, reflecting an individual’s tendency to provide answers which "justify" his labor market activity, and individual-specific heterogeneity in providing subjective evaluations. We address both concerns. We propose a semiparametric binary choice procedure which incorporates potentially 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 and functioning play a major role in the labor market exit decisions of older men.

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Paper provided by Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy in its series MEA discussion paper series with number 08169.

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Date of creation: 23 Sep 2008
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Handle: RePEc:mea:meawpa:08169
Contact details of provider: Postal: Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy, Amalienstraße 33, 80799 München, Germany
Phone: +49/89/38602.442
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