The Impact of Health on Labor Supply near Retirement

Richard Blundell; Jack Britton; Monica Costa Dias; Eric French

doi:10.3368/jhr.58.3.1217-9240R4

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Figure 1
ELSA and HRS Education Groups by Birth Year for Men
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Figure 2
ELSA and HRS Education Groups by Birth Year for Women
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Figure 3
ELSA Employment on Age, by Gender and Education
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Figure 4
Prevalence of Arthritis by Age, Gender, and Education
Notes: MA(3) indicates a three-year moving average, and FE indicates fixed-effects estimates.
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Figure 5
Single Subjective Health Index by Age, Gender, and Education
Notes: MA(3) indicates a three-year moving average, and FE indicates fixed-effects estimates.
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Figure 6
Cognition Index by Age, Gender, and Education
Notes: MA(3) indicates a three-year moving average, and FE indicates fixed-effects estimates.

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Table 1

ELSA and HRS Years and Sample Sizes

Year	ELSA		HRS
	Wave	Sample Size	Wave	Sample Size
1996			3	10,215
1998			4	13,369
2000			5	11,996
2002	1	8,008	6	10,724
2004	2	6,104	7	12,126
2006	3	6,403	8	10,618
2008	4	7,426	9	9,264
2010	5	6,620	10	13,156
2012	6	6,834	11	11,805
Total		41,395	11	103,273

Notes: Sample sizes for individuals 50–70 years old only. Total row gives total number of observations, meaning some individuals appear multiple times.

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Table 2

Objective Health Variables, Averages by Gender

Variable	ELSA		HRS
	Men	Women	Men	Women
Cancer	0.03	0.03	0.08	0.11
Diabetes	0.09	0.06	0.19	0.17
Sight	0.02	0.02	0.04	0.05
Hearing	0.05	0.02	0.06	0.02
Blood pressure	0.30	0.26	0.50	0.50
Arthritis	0.23	0.34	0.44	0.57
Psychiatric	0.05	0.08	0.12	0.21
Lung disease	0.04	0.04	0.08	0.10
Stroke	0.02	0.01	0.06	0.04
Heart attack	0.03	0.01	0.02	0.01
N	18,913	22,482	44,499	58,764

Notes: Includes individuals aged 50–70. All variables are binary measures

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Table 3
Subjective Health Variables, Averages by Gender
Variable ELSA HRS
Men Women Men Women
Health limits activities 0.41 0.54 0.54 0.67
Self reported health 2.61 2.57 2.75 2.78
Health limits work 0.24 0.25 0.25 0.27
N 18,851 22,446 44,500 58,773
Notes: Includes individuals aged 50–70. “Health limits activities” and “Health limits work” are binary measures; “Self-reported health” is a five-point categorical variable, where “5” is excellent.

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Table 4

Cognitive Variables, Averages by Gender

Variable	ELSA		HRS
	Men	Women	Men	Women
Immediate recall (out of 10)	5.96	6.28	5.55	6.02
Delayed recall (out of 10)	4.67	5.14	4.48	5.08
Difficulty navigating using map	0.02	0.04	0.06	0.13
Difficulty managing money	0.02	0.01	0.04	0.04
N	18,851	22,448	44,401	58,641

Notes: Includes individuals aged 50–70.

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Table 5

Coefficient Estimates—Employment Regression on Cognition and Subjective Health

	Men				Women
	ELSA		HRS		ELSA		HRS
	NoICs (1)	ICs (2)	NoICs (3)	ICs (4)	NoICs (5)	ICs (6)	NoICs (7)	ICs (8)
Panel A: Employment on Subjective Health
High school dropout	0.177^***	0.085^***	0.194^***	0.138^***	0.128^***	0.057^***	0.161^***	0.127^***
	(0.004)	(0.006)	(0.004)	(0.005)	(0.005)	(0.005)	(0.004)	(0.004)
High school	0.110^***	0.049^***	0.158^***	0.106^***	0.115^***	0.063^***	0.140^***	0.109^***
	(0.005)	(0.005)	(0.003)	(0.003)	(0.004)	(0.005)	(0.002)	(0.003)
College	0.071^***	0.047^***	0.096^***	0.070^***	0.068^***	0.044^***	0.087^***	0.077^***
	(0.007)	(0.007)	(0.004)	(0.004)	(0.008)	(0.008)	(0.004)	(0.005)
Panel B: Employment on Cognition
High school dropout	0.087^***	0.013^*	0.085^***	0.043^***	0.058^***	0.013^**	0.073^***	0.037^***
	(0.006)	(0.007)	(0.006)	(0.007)	(0.005)	(0.005)	(0.005)	(0.005)
High school	0.033^***	0.011^**	0.067^***	0.030^***	0.031^***	0.007	0.061^***	0.030^***
	(0.006)	(0.005)	(0.003)	(0.004)	(0.005)	(0.005)	(0.003)	(0.003)
College	0.013^*	0.004	0.049^***	0.031^***	0.019^**	−0.001	0.029^***	0.018^***
	(0.007)	(0.008)	(0.004)	(0.005)	(0.008)	(0.008)	(0.005)	(0.005)
Panel C: Employment on Cognition and Subjective Health
Cognition
High school dropout	0.035^***	0.001	0.044^***	0.029^***	0.026^***	0.006	0.034^***	0.016^***
	(0.006)	(0.007)	(0.006)	(0.006)	(0.005)	(0.005)	(0.005)	(0.005)
High school	0.009^*	0.005	0.035^***	0.017^***	0.008^*	0.001	0.030^***	0.016^***
	(0.005)	(0.005)	(0.003)	(0.003)	(0.005)	(0.005)	(0.003)	(0.003)
College	−0.001	−0.002	0.030^***	0.021^***	0.006	−0.006	0.014^***	0.009^*
	(0.007)	(0.008)	(0.004)	(0.004)	(0.008)	(0.008)	(0.005)	(0.005)
Subjective Health
High school dropout	0.168^***	0.085^***	0.185^***	0.135^***	0.122^***	0.056^***	0.153^***	0.125^***
	(0.005)	(0.006)	(0.005)	(0.005)	(0.005)	(0.005)	(0.004)	(0.004)
High school	0.108^***	0.048^***	0.151^***	0.104^***	0.114^***	0.063^***	0.134^***	0.106^***
	(0.005)	(0.005)	(0.003)	(0.003)	(0.004)	(0.005)	(0.002)	(0.003)
College	0.071^***	0.047^***	0.090^***	0.067^***	0.066^***	0.045^***	0.084^***	0.076^***
	(0.007)	(0.007)	(0.004)	(0.004)	(0.008)	(0.008)	(0.004)	(0.005)
Sample sizes	4,692	4,692	5,777	5,777	6,957	6,957	9,199	9,199
	6,326	6,326	18,756	18,756	7,911	7,911	29,905	29,905
	3,362	3,362	9,238	9,238	2,759	2,759	9,682	9,682

Notes: All estimates include age, age-squared, and wave dummies. ICs stands for initial conditions. These include the initial value of the health and cognition variables included in the regression, as well as initial employment, working experience, wealth, and marital status, and health in childhood. Significance:
↵* p < 0.10,
↵** p < 0.05,
↵*** p < 0.01.

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Table 6

Share of Employment Decline Explained by Cognition and Subjective Health

	Men		Women
	ELSA	HRS	ELSA	HRS
Panel A: Subjective Health
High school dropout	0.072^***	0.123^***	0.045^***	0.101^***
	(0.013)	(0.017)	(0.007)	(0.014)
High school	0.041^***	0.111^***	0.047^***	0.112^***
	(0.008)	(0.006)	(0.009)	(0.006)
College	0.040^***	0.084^***	0.023^***	0.077^***
	(0.011)	(0.010)	(0.008)	(0.009)
Panel B: Cognition
High school dropout	0.009	0.037^***	−0.003	0.057^***
	(0.003)	(0.010)	(0.003)	(0.011)
High school	0.001	0.028^***	−0.001	0.033^***
	(0.002)	(0.004)	(0.001)	(0.005)
College	−0.001	0.034^***	0.000	0.018^***
	(0.002)	(0.007)	(0.001)	(0.006)
Panel C: Cognition and Subjective Health
High school dropout	0.072^***	0.145^***	0.043^***	0.124^***
	(0.013)	(0.019)	(0.008)	(0.016)
High school	0.041^***	0.125^***	0.047^***	0.127^***
	(0.008)	(0.007)	(0.009)	(0.007)
College	0.040^***	0.104^***	0.023^***	0.085^***
Sample sizes	4,692	5,777	6,957	9,199
	6,326	18,756	7,911	29,905
	3,362	9,238	2,759	9,682

Notes: All estimates include age, age-squared, wave dummies, and the full set of initial conditions. Standard errors are bootstrapped with 500 repetitions. Significance:
* p < 0.10,
** p < 0.05,
↵*** p < 0.01.

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Table 7

Percent Differences in the Explained Share of Employment Decline and p-Values for Testing Null of No Differences—Explanatory Value of Adding Cognition

	Percent Differences				p-Values
	Men		Women		Men		Women
	ELSA (1)	HRS (2)	ELSA (3)	HRS (4)	ELSA (5)	HRS (6)	ELSA (7)	HRS (8)
High school dropout	0.1	18.1	−4.3	22.1	0.499	0.189	0.439	0.146
High school	−0.3	12.7	−0.4	13.4	0.496	0.078	0.495	0.055
College	1.6	22.6	3.2	10.2	0.484	0.111	0.473	0.298

Notes: Estimates of relative differences in Columns 1–4 compare figures in Panels A and C of Table 6, with Panel A as the baseline. p-values in Columns 5–8 for testing the equality of the same δ estimates.

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Table 8

Share of Employment Decline Explained by Subjective Health—Various Specifications

	Men		Women
	ELSA	HRS	ELSA	HRS
Panel A: First Principal Component
High school dropout	0.072^***	0.123^***	0.045^***	0.101^***
	(0.013)	(0.017)	(0.007)	(0.014)
High school	0.041^***	0.111^***	0.047^***	0.112^***
	(0.008)	(0.006)	(0.009)	(0.006)
College	0.040^***	0.084^***	0.023^***	0.077^***
	(0.011)	(0.010)	(0.008)	(0.009)
Panel B: Three Subjective Measures Separately
High school dropout	0.060^***	0.106^***	0.033^***	0.107^***
	(0.015)	(0.017)	(0.009)	(0.017)
High school	0.032^***	0.110^***	0.039^***	0.123^***
	(0.011)	(0.007)	(0.008)	(0.007)
College	0.011	0.080^***	0.028^***	0.078^***
	(0.013)	(0.012)	(0.011)	(0.010)
Panel C: Health Limits Work
High school dropout	0.029^***	0.084^***	0.014^*	0.104^***
	(0.011)	(0.016)	(0.007)	(0.016)
High school	0.020^***	0.101^***	0.020^***	0.119^***
	(0.006)	(0.007)	(0.006)	(0.006)
College	−0.003	0.068^***	0.003	0.071^***
	(0.007)	(0.009)	(0.006)	(0.009)
Sample sizes	4,692	5,777	6,957	9,199
	6,326	18,756	7,911	29,905
	3,362	9,238	2,759	9,682

Notes: All estimates include age, age-squared, wave dummies, and the full set of initial conditions. Standard errors are bootstrapped with 500 repetitions. Significance:
↵* p < 0.10,
** p < 0.05,
↵*** p < 0.01.

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Table 9

Percent Differences in the Explained Share of Employment Decline and p-values for Testing Null of No Differences—Explanatory Value of Added Subjective Health Information

	Percent Differences				p-Values
	Men		Women		Men		Women
	ELSA (1)	HRS (2)	ELSA (3)	HRS (4)	ELSA (5)	HRS (6)	ELSA (7)	HRS (8)
Panels B vs. A (Three Separate Subjective Measures)
High school dropout	−16.0	−13.7	−27.5	5.4	0.076	0.039	0.075	0.274
High school	−21.1	−1.0	−16.9	9.8	0.148	0.404	0.171	0.001
College	−72.8	−5.4	26.4	1.5	0.001	0.183	0.231	0.411
Panels C vs. A (Health Limits Work)
High school dropout	−58.9	−32.1	−68.6	3.0	0.000	0.002	0.000	0.388
High school	−51.6	−8.9	−58.4	6.1	0.000	0.048	0.001	0.084
College	−106.3	−19.6	−84.6	−8.1	0.000	0.012	0.005	0.193

Notes: Estimates of relative differences in Columns 1–4 compare figures in Panels A–C of Table 8, with Panel A as the baseline. p-values in Columns 5–8 for testing the equality of the same δ estimates.

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Table 10

Share of Employment Decline Explained by Subjective Health and Cognition— Subjective Health Instrumented Using Objective Health

	Men		Women
	ELSA	HRS	ELSA	HRS
Panel A: Subjective Health
High school dropout	0.086^***	0.142^***	0.055^***	0.136^***
	(0.022)	(0.024)	(0.015)	(0.023)
High school	0.053^***	0.112^***	0.058^***	0.134^***
	(0.015)	(0.011)	(0.016)	(0.011)
College	0.052^***	0.132^***	0.028^**	0.100^***
	(0.019)	(0.021)	(0.013)	(0.018)
Panel B: Subjective Health and Cognition
High school dropout	0.085^***	0.158^***	0.054^***	0.147^***
	(0.022)	(0.024)	(0.016)	(0.022)
High school	0.053^***	0.122^***	0.058^***	0.144^***
	(0.014)	(0.011)	(0.016)	(0.011)
College	0.054^***	0.142^***	0.029^**	0.103^***
	(0.020)	(0.020)	(0.014)	(0.018)
Sample sizes	4,692	5,777	6,957	9,199
	6,326	18,756	7,911	29,905
	3,362	9,238	2,759	9,682

Notes: All estimates include age, age-squared, wave dummies, and the full set of initial conditions. Standard errors are bootstrapped with 500 repetitions. Significance:
* p < 0.10,
↵** p < 0.05,
↵*** p < 0.01.

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Table 11

Percent Differences in the Explained Share of Employment Decline and p-values for Testing Null of No Differences—Comparing OLS and IV Estimates

	Percent Differences				p-Values
	Men		Women		Men		Women
	ELSA (1)	HRS (2)	ELSA (3)	HRS (4)	ELSA (5)	HRS (6)	ELSA (7)	HRS (8)
Panels B vs. A (Three Separate Subjective Measures)
High school dropout	19.6	15.4	22.5	34.5	0.294	0.272	0.280	0.100
High school	29.8	1.1	22.5	20.1	0.247	0.462	0.284	0.048
College	31.2	55.7	23.0	29.4	0.295	0.021	0.377	0.136
Panels C vs. A (Health Limits Work)
High school dropout	18.8	9.0	27.0	18.8	0.300	0.342	0.263	0.198
High school	29.6	−2.2	23.2	13.1	0.247	0.415	0.275	0.117
College	32.9	37.3	22.7	21.1	0.290	0.049	0.378	0.201

Notes: Estimates of relative differences in Columns 1–4 compare figures in Panels A and C of Table 6 with those in Panels A and B of Table 10, with Table 6 as the baseline. p-values in Columns 5–8 for testing the equality of the same δ estimates.

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Table 12

Overidentification Test

	Men		Women
	ELSA (1)	HRS (2)	ELSA (3)	HRS (4)
Panel A: Subjective Health
High school dropout	0.221	0.217	0.134	0.001
High school	0.106	0.000	0.284	0.000
College	0.280	0.000	0.093	0.000
Panel B: Subjective Health, with Cognition
High school dropout	0.203	0.238	0.136	0.001
High school	0.110	0.000	0.290	0.000
College	0.283	0.000	0.079	0.000

Notes: Table compares F-statistic to χ² critical values, giving p-values for the null of no statistical relationship between our objective measures and the IV residuals.

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Table 13

Share of Employment Decline Explained by Objective Health

	Men		Women
	ELSA	HRS	ELSA	HRS
Panel A: Blood Pressure Only
High school dropout	0.030^**	0.050^***	0.013	0.053^***
	(0.013)	(0.013)	(0.009)	(0.012)
High school	0.008	0.023^***	0.004	0.024^***
	(0.009)	(0.006)	(0.007)	(0.006)
College	0.007	0.034^***	0.005	0.035^***
	(0.009)	(0.010)	(0.010)	(0.009)
Panel B: Add Arthritis, Psychiatric, Lung
High school dropout	0.061^***	0.102^***	0.045^***	0.126^***
	(0.017)	(0.015)	(0.015)	(0.017)
High school	0.022^*	0.061^***	0.039^***	0.075^***
	(0.012)	(0.009)	(0.013)	(0.009)
College	0.024^*	0.062^***	0.004	0.056^***
	(0.013)	(0.014)	(0.016)	(0.015)
Panel C: Add Cancer, Diabetes, Stroke, Heart Attack
High school dropout	0.080^***	0.156^***	0.068^***	0.181^***
	(0.018)	(0.019)	(0.017)	(0.022)
High school	0.033^**	0.081^***	0.039^***	0.098^***
	(0.013)	(0.011)	(0.013)	(0.010)
College	0.038^**	0.096^***	0.012	0.075^***
	(0.015)	(0.017)	(0.016)	(0.016)
Panel D: Add Sight, Hearing—Full Specification
High school dropout	0.081^***	0.152^***	0.067^***	0.197^***
	(0.019)	(0.019)	(0.018)	(0.023)
High school	0.034^**	0.084^***	0.038^***	0.101^***
	(0.013)	(0.011)	(0.013)	(0.010)
College	0.038^**	0.100^***	0.017	0.073^***
	(0.015)	(0.017)	(0.016)	(0.017)
Sample sizes	4,692	5,777	6,957	9,199
	6,326	18,756	7,911	29,905
	3,362	9,238	2,759	9,682

Notes: All estimates include age, age-squared, wave dummies, and the full set of initial conditions. Standard errors are bootstrapped with 500 repetitions. Significance:
↵* p < 0.10,
↵** p < 0.05,
↵*** p < 0.01.

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Table 14

Percent Differences in the Explained Share of Employment Decline and p-values for Testing Null of No Differences—Comparing Subjective and Objective Health Measures

	Percent Differences				p-Values
	Men		Women		Men		Women
	ELSA (1)	HRS (2)	ELSA (3)	HRS (4)	ELSA (5)	HRS (6)	ELSA (7)	HRS (8)
High school dropout	−5.7	6.8	21.6	44.6	0.405	0.331	0.163	0.006
High school	−36.6	−24.9	−33.9	−25.0	0.022	0.001	0.066	0.000
College	−27.4	−23.9	−38.8	−26.4	0.159	0.028	0.159	0.004

Notes: Estimates of relative differences in Columns 1−4 compare figures in Panel D of Table 13 and those in Panel A of Table 10, with the latter as baseline. p-values in Columns 5–8 for testing the equality of the same δ estimates.

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Table 15

Oaxaca Decomposition of U.S.-English Differences

	Men			Women
	θ	ΔH	ΔY	θ	ΔH	ΔY
Subjective health
High school dropout	0.97	−0.04	0.07	0.85	−0.24	0.38
High school	0.97	−0.08	0.11	0.69	0.09	0.22
College	0.57	0.11	0.32	0.76	0.03	0.20
Subjective health and cognition
High school dropout	1.03	−0.08	0.05	0.85	−0.19	0.33
High school	0.93	−0.02	0.10	0.74	0.06	0.20
College	0.70	0.01	0.30	0.86	−0.06	0.20

Notes: Decomposition of the U.S.-English differences in the estimates of δ by its different components. Estimates are blanked out where they are uninformative. Columns labeled θ, ΔH, and ΔY show the shares explained by differences in the estimated coefficients, health declines, and employment declines, respectively.

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Variable	ELSA		HRS
	Men	Women	Men	Women
Health limits activities	0.41	0.54	0.54	0.67
Self reported health	2.61	2.57	2.75	2.78
Health limits work	0.24	0.25	0.25	0.27
N	18,851	22,446	44,500	58,773

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