Dynamics of Poor Health and Non-Employment

24 Pages Posted: 13 May 2009

See all articles by Peter Haan

Peter Haan

DIW Berlin, German Institute for Economic Research; IZA Institute of Labor Economics

Michal Myck

German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Abstract

While there is little doubt that the probability of poor health increases with age, and that less healthy people face a more difficult situation on the labour market, the precise relationship between facing the risks of health deterioration and labour market instability is not well understood. Using twelve years of data from the German Socio-Economic Panel we study the nature of the relationship between poor health and non-employment on a sample of German men aged 30-59. We propose to model poor health and non-employment as interrelated risks determined within a dynamic structure conditional on a set of individual characteristics. Applying dynamic panel estimation we identify the mechanism through which poor health contributes to the probability of being jobless and vice versa. We find an important role of unobserved heterogeneity and evidence for correlation in the unobservable characteristics determining the two processes. The results also show strong persistence in the dynamics of poor health and non-employment.

Keywords: health, non-employment, risk, ageing, dynamic panel data

JEL Classification: C33, J21, J14

Suggested Citation

Haan, Peter and Myck, Michal, Dynamics of Poor Health and Non-Employment. IZA Discussion Paper No. 4154, Available at SSRN: https://ssrn.com/abstract=1402461 or http://dx.doi.org/10.2139/ssrn.1402461

Peter Haan (Contact Author)

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michal Myck

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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