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Ill health and retirement in Britain: a panel data-based analysis
Richard Disney1, Carl Emmerson, Matthew Wakefield
1Institute for Fiscal Studies, London, UK. richard.disney@nottingham.ac.uk
Journal of Health Economics
|May 9, 2006
Summary
Ill health significantly impacts retirement decisions for older British workers. Adverse health shocks predict earlier retirement, influencing labor force transitions.
Area of Science:
- Health Economics
- Retirement Studies
- Labor Economics
Background:
- Retirement decisions are influenced by health status.
- Self-reported health may be endogenous to retirement choices.
- Existing research needs robust methods to address health endogeneity.
Purpose of the Study:
- To investigate the causal effect of ill health on retirement decisions in Britain.
- To address endogeneity issues in self-reported health data.
- To analyze the impact of health shocks on labor force transitions.
Main Methods:
- Utilized the British Household Panel Survey (1991-1998).
- Employed instrumental variable strategy using a constructed 'health stock' measure.
- Applied econometric techniques to analyze retirement behavior and health shocks.
Main Results:
- Adverse health stock shocks predict retirement among workers aged 50 to state pension age.
- Health shocks influence transitions into and out of economic activity.
- Compared effects of constructed health measures versus direct health indicators.
Conclusions:
- Health status is a significant predictor of retirement timing.
- Health shocks have a demonstrable impact on labor force participation.
- The study provides robust evidence on the health-retirement nexus.
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