Ill-Health and Transitions to Part-Time Work and Self-Employment Among Older Workers

30 Pages Posted: 13 Jan 2014 Last revised: 14 Jan 2014

See all articles by Eugenio Zucchelli

Eugenio Zucchelli

University of York - Centre for Health Economics

Mark N. Harris

Curtin University

Xueyan Zhao

Monash University

Multiple version iconThere are 2 versions of this paper

Date Written: February 20, 2012


This paper employs a dynamic multinomial choice framework to provide new evidence on the effect of health on labour market transitions among older individuals. We consider retirement as a multi-state process and examine the effects of ill-health and health shocks on mobility between full-time employment, part-time employment, self-employment and inactivity. In order to disentangle the roles of unobserved individual heterogeneity and true state dependence, we estimate dynamic panel multinomial logit models with random effects, assuming a first order Markov process and accounting for the initial conditions problem. We also account for potential measurement error in the self-assessed health status by building a latent health stock model and employing measures of health shocks. Using data from the first nine waves of the (2001-2009) Household, Income and Labour Dynamics in Australia (HILDA) Survey, we find that both ill-health and health shocks greatly increase the probability of leaving full-time employment towards inactivity. We also find evidence of health-driven part-time and self-employment paths into inactivity.

Keywords: ill-health, health shocks, labour transitions, dynamic multinomial choice models

JEL Classification: C23, I10, J24

Suggested Citation

Zucchelli, Eugenio and Harris, Mark N. and Zhao, Xueyan, Ill-Health and Transitions to Part-Time Work and Self-Employment Among Older Workers (February 20, 2012). CRAE Research Paper No. 03032012. Available at SSRN: or

Eugenio Zucchelli (Contact Author)

University of York - Centre for Health Economics ( email )

York YO10 5DD
United Kingdom
+44 (0)1904 321433 (Phone)

Mark N. Harris

Curtin University ( email )

Kent Street
Perth, WA WA 6102


Xueyan Zhao

Monash University ( email )

PO Box 11E
Monash University,
Melbourne, VIC 3800, Victoria
+61 3 9905 2415 (Phone)
+61 3 9905 5474 (Fax)

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