EconPapers    
Economics at your fingertips  
 

The Dynamic Effects of Health on the Employment of Older Workers

Richard Blundell (), Jack Britton, Monica Costa Dias () and Eric French ()
Additional contact information
Jack Britton: Institute for Fiscal Studies

Working Papers from University of Michigan, Michigan Retirement Research Center

Abstract: Using data from the Health and Retirement Study (HRS) and the English Longitudinal Study of Ageing (ELSA), we estimate a dynamic model of health and employment. We estimate how transitory and persistent health shocks affect employment over time. In a first step we formulate and estimate a dynamic model of health. The procedure accounts for measurement error and the possibility that people might justify their employment status by reporting bad health. We find that health is well represented by the sum of a transitory white noise process and a persistent AR(1) process. Next, we use the method of simulated moments to estimate the employment response to these shocks. We find that persistent shocks have much bigger effects on employment than transitory shocks, and that these persistent shocks are long lived. For this reason employment is strongly correlated with lagged health, a fact that the usual cross sectional estimates do not account for. We also show that accounting for the dynamics of health and employment leads to larger estimates of the effect of health on employment than what simple OLS estimates of health on employment would imply. We argue that the dynamic effect of health on employment could be generated by a model with human capital accumulation, where negative health shocks slowly reduce the human capital stock, and thus gradually causes people to exit the labor market.

Pages: 26 pages
Date: 2016-09
New Economics Papers: this item is included in nep-age, nep-hea and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp348.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mrr:papers:wp348

Access Statistics for this paper

More papers in Working Papers from University of Michigan, Michigan Retirement Research Center P.O. Box 1248, Ann Arbor, MI 48104. Contact information at EDIRC.
Bibliographic data for series maintained by MRRC Administrator ().

 
Page updated 2021-04-21
Handle: RePEc:mrr:papers:wp348