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

Jürgen Maurer; Roger Klein; Francis Vella

doi:10.1162/rest_a_00097

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

Jürgen Maurer^1,2; Roger Klein³; Francis Vella⁴

¹ Institute of Health Economics · ² University of Lausanne · ³ Rutgers Sexual and Reproductive Health and Rights · ⁴ Georgetown University

The Review of Economics and Statistics 2011

We use panel data from the U.S. Health and Retirement Study, 1992–2002, to estimate the effect of self-assessed health limitations on the active labor market participation of older men. Self-assessments of health are likely to be endogenous to labor supply due to justification bias and individual-specific heterogeneity in subjective evaluations. We address both concerns. We propose a semiparametric binary choice procedure that incorporates 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 plays a major role in labor market exit decisions.

DOI: 10.1162/rest_a_00097
Volume: 93 (3)
Pages: 764-774
Language: en
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