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Option Value of Work, Health Status, and Retirement Decisions in Japan: Evidence from the Japanese Study on Aging and Retirement (JSTAR)

In: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement

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  • Satoshi Shimizutani
  • Takashi Oshio
  • Mayu Fujii

Abstract

This study examined the factors that affect the retirement decisions of the middle-aged and elderly in Japan, focusing especially on their earnings, public pension benefits, and health status. Using two-year panel data from the JSTAR and applying the OV model proposed by Stock and Wise (1990a, 1990b), we found that the probability of retirement has a negative and significant correlation with the OV of work, and that correlation does not depend on the health status. Our counter-factual simulation based on the OV model showed that, if the probability of being enrolled in the disability program were zero, the average years of work when individuals are in their 50s and 60s would increase. However, it should be emphasized that, in Japan--where being enrolled in the disability program is unlikely to make one a candidate for the retirement path--the result of this simulation does not indicate that satisfying the eligibility criteria for disability pension receipts will more stringently increase the labor supplied by the middle-aged and elderly.
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Suggested Citation

  • Satoshi Shimizutani & Takashi Oshio & Mayu Fujii, 2014. "Option Value of Work, Health Status, and Retirement Decisions in Japan: Evidence from the Japanese Study on Aging and Retirement (JSTAR)," NBER Chapters, in: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement, pages 497-535, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13330
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    References listed on IDEAS

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    1. Takashi Oshio & Satoshi Shimizutani & Akiko Sato Oishi, 2010. "Does Social Security Induce Withdrawal of the Old from the Labor Force and Create Jobs for the Young? The Case of Japan," NBER Chapters, in: Social Security Programs and Retirement around the World: The Relationship to Youth Employment, pages 217-241, National Bureau of Economic Research, Inc.
    2. Jonathan Gruber & David A. Wise, 2010. "Social Security Programs and Retirement around the World: The Relationship to Youth Employment," NBER Books, National Bureau of Economic Research, Inc, number grub08-1.
    3. Satoshi Shimizutani, 2013. "Social Security Earnings Test and the Labour Supply of the Elderly: New Evidence from Unique Survey Responses in Japan," The Japanese Economic Review, Japanese Economic Association, vol. 64(3), pages 399-413, September.
    4. ICHIMURA Hidehiko & SHIMIZUTANI Satoshi & HASHIMOTO Hideki, 2009. "JSTAR First Results 2009 Report," Discussion papers 09047, Research Institute of Economy, Trade and Industry (RIETI).
    5. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets," NBER Chapters, in: Explorations in the Economics of Aging, pages 23-69, National Bureau of Economic Research, Inc.
    6. Takashi Oshio & Akiko Sato Oishi & Satoshi Shimizutani, 2011. "Social Security Reforms And Labour Force Participation Of The Elderly In Japan," The Japanese Economic Review, Japanese Economic Association, vol. 62(2), pages 248-271, June.
    7. Shimizutani, Satoshi & Oshio, Takashi, 2013. "Revisiting the labor supply effect of social security earnings test: New evidence from its elimination and reinstatement in Japan," Japan and the World Economy, Elsevier, vol. 28(C), pages 99-111.
    8. Satoshi Shimizutani & Takashi Oshio, 2016. "Public Pension Benefits Claiming Behaviour: new Evidence from the Japanese Study on Ageing and Retirement," The Japanese Economic Review, Springer, vol. 67(3), pages 235-256, September.
    9. David A. Wise, 1990. "Issues in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise90-1.
    10. Takashi Oshio & Satoshi Shimizutani, 2012. "Disability Pension Program and Labor Force Participation in Japan: An Historical Perspective," NBER Chapters, in: Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participatio, pages 391-417, National Bureau of Economic Research, Inc.
    11. Takashi Oshio & Akiko Sato Oishi, 2004. "Social Security and Retirement in Japan: An Evaluation Using Micro-Data," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 399-460, National Bureau of Economic Research, Inc.
    12. ICHIMURA Hidehiko & SHIMIZUTANI Satoshi, 2011. "Retirement Process in Japan: New evidence from Japanese Study on Aging and Retirement (JSTAR)," Discussion papers 11080, Research Institute of Economy, Trade and Industry (RIETI).
    13. David A. Wise, 2012. "Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms," NBER Books, National Bureau of Economic Research, Inc, number wise11-1.
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    Cited by:

    1. Chen, Brian K. & Jalal, Hawre & Hashimoto, Hideki & Suen, Sze-chuan & Eggleston, Karen & Hurley, Michael & Schoemaker, Lena & Bhattacharya, Jay, 2016. "Forecasting trends in disability in a super-aging society: Adapting the Future Elderly Model to Japan," The Journal of the Economics of Ageing, Elsevier, vol. 8(C), pages 42-51.
    2. Megumi Kasajima & Hideki Hashimoto & Sze‐Chuan Suen & Brian Chen & Hawre Jalal & Karen Eggleston & Jay Bhattacharya, 2021. "Future projection of the health and functional status of older people in Japan: A multistate transition microsimulation model with repeated cross‐sectional data," Health Economics, John Wiley & Sons, Ltd., vol. 30(S1), pages 30-51, November.

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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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