IDEAS home Printed from https://ideas.repec.org/p/wyi/wpaper/002390.html
   My bibliography  Save this paper

Occupational Retirement and Social Security Reform: the Roles of Physical and Cognitive Health

Author

Listed:
  • Jiayi Wen

    (Xiamen University)

Abstract

Under skill-biased technical change, jobs are becoming less physically demanding whereas require increasing cognitive abilities. However, existing research does not pay sufficient attention on the role of cognitive health in older people's labor supply, nor to the occupation-dependent labor supply effects of physical and cognitive health. This paper reveals several facts about the heterogeneity of physical and cognitive health, as well as their relationship with older people's labor supply across occupations. Based on these facts, this paper proposes and estimates a dynamic programming structural model of individual retirement and saving decisions. The model allows labor supply effects of physical and cognitive health to differ across occupations via four channels respectively: disutility of working, wage, medical expenditure and life expectancy . I estimate the model with the U.S. Health and Retirement Study data by Indirect Inference. The counterfactual experiments suggest cognitive health has little retirement effect for manual workers. However, for clerical workers, the effect is almost as large as the one of physical health. The counterfactual experiment also reveals the mechanisms through which physical and cognitive health affects labor supply respectively. Finally, this paper quantifies the distributional effects of proposed Social Security changes on retirement, benefits and welfare across occupations.

Suggested Citation

  • Jiayi Wen, 2018. "Occupational Retirement and Social Security Reform: the Roles of Physical and Cognitive Health," Working Papers 2018-12-04, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  • Handle: RePEc:wyi:wpaper:002390
    as

    Download full text from publisher

    File URL: http://research.soe.xmu.edu.cn/repec/upload/201812042007355251.pdf
    Download Restriction: no

    File URL: http://research.soe.xmu.edu.cn/repec/upload/201812042022386466.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Capatina, Elena, 2015. "Life-cycle effects of health risk," Journal of Monetary Economics, Elsevier, vol. 74(C), pages 67-88.
    2. Haan, Peter & Prowse, Victoria, 2014. "Longevity, life-cycle behavior and pension reform," Journal of Econometrics, Elsevier, vol. 178(P3), pages 582-601.
    3. Mazzonna, Fabrizio & Peracchi, Franco, 2012. "Ageing, cognitive abilities and retirement," European Economic Review, Elsevier, vol. 56(4), pages 691-710.
    4. Kathleen McGarry, 2004. "Health and Retirement: Do Changes in Health Affect Retirement Expectations?," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
    5. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    6. Bingley, Paul & Martinello, Alessandro, 2013. "Mental retirement and schooling," European Economic Review, Elsevier, vol. 63(C), pages 292-298.
    7. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jack Britton & Eric French, 2020. "Health and Employment amongst Older Workers," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 221-250, March.
    2. Eibich, P., 2014. "Understanding the effect of retirement on health using Regression Discontinuity Design," Health, Econometrics and Data Group (HEDG) Working Papers 14/10, HEDG, c/o Department of Economics, University of York.
    3. Eibich, Peter, 2015. "Understanding the Effect of Retirement on Health: Mechanisms and Heterogeneity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1-12.
    4. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    5. Antoine Bozio & Clémentine Garrouste & Elsa Perdrix, 2021. "Impact of later retirement on mortality: Evidence from France," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1178-1199, May.
    6. Michael Insler, 2014. "The Health Consequences of Retirement," Journal of Human Resources, University of Wisconsin Press, vol. 49(1), pages 195-233.
    7. Motegi, H. & Nishimura, Y. & Oikawa, M., 2016. "Retirement and Cognitive Decline: Evidence from Global Aging Data," Health, Econometrics and Data Group (HEDG) Working Papers 16/11, HEDG, c/o Department of Economics, University of York.
    8. Yoshinori Nishimura & Masato Oikawa & Hiroyuki Motegi, 2018. "What Explains The Difference In The Effect Of Retirement On Health? Evidence From Global Aging Data," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 792-847, July.
    9. Pierre-Jean Messe & François-Charles Wolff, 2019. "Healthier when retiring earlier? Evidence from France," Applied Economics, Taylor & Francis Journals, vol. 51(47), pages 5122-5143, October.
    10. Kemptner, Daniel, 2019. "Health-related life cycle risks and public insurance," Journal of Health Economics, Elsevier, vol. 65(C), pages 227-245.
    11. Didier Blanchet & Thierry Debrand, 2007. "Souhaiter prendre sa retraite le plus tôt possible : santé, satisfaction au travail et facteurs monétaires," Économie et Statistique, Programme National Persée, vol. 403(1), pages 39-62.
    12. Didier Blanchet & Thierry Debrand, 2008. "The sooner, the better? Analyzing preferences for early retirement in European countries," Working Papers DT13, IRDES institut for research and information in health economics, revised Jul 2008.
    13. Hiroyuki Motegi & Yoshinori Nishimura & Kazuyuki Terada, 2016. "Does Retirement Change Lifestyle Habits?," The Japanese Economic Review, Japanese Economic Association, vol. 67(2), pages 169-191, June.
    14. Lei, Xiaoyan & Liu, Hong, 2018. "Gender difference in the impact of retirement on cognitive abilities: Evidence from urban China," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1425-1446.
    15. Antoine Bozio & Clémentine Garrouste & Elsa Perdrix, 2020. "Impact of later retirement on mortality: Evidence from France," Working Papers halshs-02019046, HAL.
    16. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
    17. Apouey, Bénédicte H. & Guven, Cahit & Senik, Claudia, 2019. "Retirement and Unexpected Health Shocks," Economics & Human Biology, Elsevier, vol. 33(C), pages 116-123.
    18. Blau, David M. & Riphahn, Regina T., 1999. "Labor force transitions of older married couples in Germany," Labour Economics, Elsevier, vol. 6(2), pages 229-252, June.
    19. Eric French & John Bailey Jones, 2017. "Health, Health Insurance, and Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 383-409, September.
    20. Thomas Barnay, 2016. "Health, work and working conditions: a review of the European economic literature," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(6), pages 693-709, July.

    More about this item

    Keywords

    Cognition; Retirement; Social Security;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wyi:wpaper:002390. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.wise.xmu.edu.cn/english/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WISE Technical Team (email available below). General contact details of provider: http://www.wise.xmu.edu.cn/english/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.