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Estimating the Stochastic Sickness Effect on Employment, Worktime and Saving Decisions

Chian-Ming Chen () and Kuo-Liang Chang
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Chian-Ming Chen: Department of Economics, National Chi Nan University, Nantou, Taiwan
Kuo-Liang Chang: Department of Economics, South Dakota State University

No 32009, SDSU Working Papers in Progress from South Dakota State University, Department of Economics

Abstract: This paper aims to study labor supply and saving decisions as a result of health uncertainty. O’Donnell (1995) suggested a theoretical positive relationship between working hours (or saving rate) and the perceived health uncertainty. That is, for risk-averse individuals, there exists a precaution motion to work harder and save more when facing the uncertainty for the health condition. We test this hypothetical relationship by applying the 2003-2005 data from the Panel Study of Family Dynamics (PSFD) in Taiwan. Following Hughes and Maguire’s approach (2003), our estimation result indicates that a stochastic sickness has positive effects on the decisions of working time and saving rate.

Keywords: Health; Uncertainty; Labor Supply; Saving (search for similar items in EconPapers)
JEL-codes: D14 I12 J22 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2009-09
New Economics Papers: this item is included in nep-lab
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