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The impact of health on labour supply near retirement

Author

Listed:
  • Richard Blundell

    (Institute for Fiscal Studies and University College London)

  • Jack Britton

    (Institute for Fiscal Studies)

  • Monica Costa Dias

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Eric French

    (Institute for Fiscal Studies and University College London and University of Cambridge)

Abstract

Estimates of the effect of health on employment differ signi cantly from study to study due to differences in method, data, institutional background and health measure. We assess the importance of these differences using a unifi ed framework to interpret and contrast estimates of the impact of health on employment based on various measures of health and estimation procedures. This is done for the US and England. We fi nd that subjective and objective health measures, as well as subjective measures instrumented by objective measures produce similar estimates if a sufficiently large number of objective measures is used. Reducing the number of objective measures used compromises their ability to capture work capacity and biases estimates downwards. Failure to account for initial conditions leads to an overstatement of the effect of health on employment. We also find that a carefully constructed single index of subjective health yields estimates that are very similar to those obtained with multiple measures. Overall, declines in health can explain between 3% and 15% of the decline in employment between ages 50 and 70. These effects are larger among high-school dropouts and tend to drop with education; they are also larger in the US than in England. Finally, cognition has little added explanatory power once we also control for health, suggesting that cognition is not a key driver of employment at these ages.

Suggested Citation

  • Richard Blundell & Jack Britton & Monica Costa Dias & Eric French, 2017. "The impact of health on labour supply near retirement," IFS Working Papers W17/18, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:17/18
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    1. The impact of health on labour supply near retirement
      by maximorossi in NEP-LTV blog on 2018-02-20 19:27:23

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    4. Cheng, Terence C. & Kim, Seonghoon & Petrie, Dennis, 2024. "Health shocks, health and labor market dynamics, and the socioeconomic-health gradient in older Singaporeans," Social Science & Medicine, Elsevier, vol. 348(C).
    5. Vandenberghe, Vincent, 2019. "Health, Cognition and Work Capacity Beyond the Age of 50," GLO Discussion Paper Series 295, Global Labor Organization (GLO).
    6. Jessamyn Schaller & Chase Eck, 2019. "Adverse Life Events and Intergenerational Transfers," Upjohn Working Papers 19-309, W.E. Upjohn Institute for Employment Research.
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    9. Vincent Vandenberghe, 2020. "The Rather Limited Role Of Mental Ill Health In Driving Work Beyond 50," LIDAM Discussion Papers IRES 2020020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Jiayi Wen & Zixi Ye & Xuan Zhang, 2024. "A New Testing Method for Justification Bias Using High-Frequency Data of Health and Employment," Papers 2403.06368, arXiv.org.
    11. Vincent VANDENBERGHE, 2021. "Health, cognition and work capacity beyond the age of 50: International evidence on the extensive and intensive margins of work," International Labour Review, International Labour Organization, vol. 160(2), pages 271-310, June.
    12. Chen, Wen-Hao, 2019. "Health and transitions into nonemployment and early retirement among older workers in Canada," Economics & Human Biology, Elsevier, vol. 35(C), pages 193-206.
    13. Naoki Aizawa & Chao Fu, 2020. "Interaction of the Labor Market and the Health Insurance System: Employer-Sponsored, Individual, and Public Insurance," NBER Working Papers 26713, National Bureau of Economic Research, Inc.
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    15. Richard Blundell & Jack Britton & Monica Costa Dias & Eric French & Weijian Zou, 2022. "The Dynamic Effects of Health on the Employment of Older Workers: Impacts by Gender, Country, and Race," Working Papers wp451, University of Michigan, Michigan Retirement Research Center.
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    18. Mark L Bryan & Nigel Rice & Jennifer Roberts & Cristina Sechel, 2022. "Mental Health and Employment: A Bounding Approach Using Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(5), pages 1018-1051, October.
    19. White, Matthew N., 2023. "Self-reported health status and latent health dynamics," Journal of Health Economics, Elsevier, vol. 88(C).
    20. Margherita Borella & Mariacristina De Nardi & Fang Yang, 2017. "The Effects of Marriage-Related Taxes and Social Security Benefits," NBER Working Papers 23972, National Bureau of Economic Research, Inc.
    21. Hsu, De Fen & Morrill, Melinda & Pathak, Aditi, 2024. "Health and retirement: Heterogeneity in the responsiveness to pension incentives," Economics Letters, Elsevier, vol. 238(C).
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    More about this item

    Keywords

    Health; cognition; labor supply; retirement;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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