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Health, Economic Resources and the Work Decisions of Older Men

John Bound, Todd Stinebrickner () and Timothy Waidmann

No 20076, University of Western Ontario, Economic Policy Research Institute Working Papers from University of Western Ontario, Economic Policy Research Institute

Abstract: In this paper, we specify a dynamic programming model that addresses the interplay among health, financial resources, and the labor market behavior of men in the later part of their working lives. Unlike previous work which has typically used self reported health or disability status as a proxy for health status, we model health as a latent variable, using self reported disability status as an indicator of this latent construct. Our model is explicitly designed to account for the possibility that the reporting of disability may be endogenous to the labor market behavior we are studying. The model is estimated using data from the Health and Retirement Study. We compare results based on our model to results based on models that treat health in the typical way, and find large differences in the estimated effect of health on behavior. While estimates based on our model suggest that health has a large impact on behavior, the estimates suggest a substantially smaller role for health than we find when using standard techniques. We use our model to simulate the impact on behavior of raising the normal retirement age, eliminating early retirement altogether and eliminating the Social Security Disability Insurance program.

Keywords: retirement behavior; disability insurance; social security; dynamic programming, latent Variable models (search for similar items in EconPapers)
JEL-codes: C15 C61 H55 J14 J26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-hea, nep-ias and nep-lab
Date: 2007
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Journal Article: Health, economic resources and the work decisions of older men (2010) Downloads
Working Paper: Health, Economic Resources and the Work Decisions of Older Men (2007) Downloads
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