Subjective Health Assessments and Active Labor Market Participation of Older Men: Evidence from a Semiparametric Binary Choice Model with Nonadditive Correlated Individual-Specific Effects

33 Pages Posted: 3 Nov 2008

See all articles by Jürgen Maurer

Jürgen Maurer

University of Mannheim

Francis Vella

Georgetown University; IZA Institute of Labor Economics

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Abstract

We use panel data from the US Health and Retirement Study 1992-2002 to estimate the effect of self-assessed health limitations on active labor market participation of men around retirement age. Self-assessments of health and functioning typically introduce an endogeneity bias when studying the effects of health on labor market participation. This results from justification bias, reflecting an individual's tendency to provide answers which "justify" his labor market activity, and individual-specific heterogeneity in providing subjective evaluations. We address both concerns. We propose a semiparametric binary choice procedure which incorporates potentially nonadditive correlated individual-specific effects. Our estimation strategy identifies and estimates the average partial effects of health and functioning on labor market participation. The results indicate that poor health and functioning play a major role in the labor market exit decisions of older men.

Keywords: nonadditive correlated effects, retirement, health, semiparametric estimation

JEL Classification: I10, J10, J26, C14, C30

Suggested Citation

Maurer, Jürgen and Vella, Francis, Subjective Health Assessments and Active Labor Market Participation of Older Men: Evidence from a Semiparametric Binary Choice Model with Nonadditive Correlated Individual-Specific Effects. IZA Discussion Paper No. 3257, Available at SSRN: https://ssrn.com/abstract=1294509 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Jürgen Maurer

University of Mannheim

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

Francis Vella (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States
202-687-5573 (Phone)

HOME PAGE: http://explore.georgetown.edu/people/fgv/

IZA Institute of Labor Economics

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

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