Christensen, Bent Jesper3; Kallestrup-Lamb, Malene3
1 Department of Economics and Business Economics, Aarhus BSS, Aarhus University2 Department of Economics and Business Economics - Center for Research in Econometric Analysis of Time Series (CREATES), Department of Economics and Business Economics, Aarhus BSS, Aarhus University3 Department of Economics and Business Economics, Aarhus BSS, Aarhus University
The justification bias in the estimated impact of health shocks on retirement is mitigated by using objective health measures from a large, register-based longitudinal data set including medical diagnosis codes, along with labor market status, financial, and socio-economic variables. The duration until retirement is modeled using single and competing risk specifications, observed and unobserved heterogeneity, and flexible baseline hazards. Wealth is used as a proxy for elapsed duration to mitigate the potential selection bias stemming from conditioning on initial participation. The competing risk specification distinguishes complete multi-period routes to retirement, such as unemployment followed by early retirement. A result on comparison of coefficients across all states is offered. The empirical results indicate a strong impact of health changes on retirement, and hence a large potential for public policy measures intended to retain older workers longer in the labor force. Disability responds more to health shocks than early retirement, especially to diseases of the circulatory, respiratory, and musculoskeletal systems, as well as mental and behavioral disorders. Some unemployment spells followed by early retirement appear voluntary, and spurred by life style diseases.
Health Economics, 2012, Vol 21, Issue S1, p. 56-100