This paper develops an innovative approach to measuring the effect of health on retirement. The approach elicits subjective probabilities of working at specified time horizons fixing health level. Using a treatment-effect framework, within-individual differences in elicited probabilities of working given health yield individual-level estimates of the causal effect of health (the treatment) on working (the outcome). We call this effect the Subjective ex ante Treatment Effect (SeaTE). The paper then develops a dynamic programming framework for the SeaTE. This framework allows measurement of individual-level value functions that map directly into the dynamic programming model commonly used in structural microeconometric analysis of retirement. The paper analyzes conditional probabilities elicited in the Vanguard Research Initiative (VRI)—a survey of older Americans with positive assets. Among workers 58 and older, a shift from high to low health would on average reduce the odds of working by 28.5 percentage points at a two-year horizon and 25.7 percentage points at a four-year horizon. There is substantial variability across individuals around these average SeaTEs, so there is substantial heterogeneity in taste for work or returns to work. This heterogeneity would be normally unobservable and hard to disentangle from other determinants of retirement in data on realized labor supply decisions and health states. The paper’s approach can overcome the problem that estimates of the effect of health on labor supply based on behavioral (realizations) data can easily overstate the effect of health on retirement whenever less healthy workers tend to retire earlier for reasons other than health.
SeaTE: Subjective ex ante Treatment Effect of Health on Retirement by Pamela Giustinelli, Matthew D. Shapiro :: SSRNJanuary 2, 2019
The Unintended Consequences of Flexicurity: The Health Consequences of Flexible Employment by Keith A. Bender, Ioannis Theodossiou :: SSRNJanuary 2, 2019
While atypical employment contracts offer flexibility in the labor market, these kinds of contracts are inherently insecure and may generate stress among affected workers. This study examines the impact of atypical forms of employment (specifically seasonal or temporary jobs or a fixed time contracts) on workers’ health. Survival analysis shows that, other things equal, the longer percent of time spent in flexible employment contracts increases the odds of falling into ill health for a variety of health conditions. The results are robust to controlling for the endogeneity in the relationship.
Informal Bankruptcy: Health Expenditure Shocks and Financial Distress Avoidance by G. Nathan Dong :: SSRNOctober 19, 2018
This article studies the financial decision-making behavior of U.S. families that have difficulties paying for their medical bills and investigate what alternatives they have to avoid filing for formal bankruptcy and what influence their motivation to do so. Using household financial and demographic information from the Health Tracking Household Survey in 2007 and 2010, this article finds that families with younger age members, minority ethnic background, more doctor visits, and without insurance made more diverse and severe choices to finance the payments before resorting to personal bankruptcy. Interestingly, households with better education seek more diverse but easier financing methods, suggesting that financial literacy may play a dual role in undertaking financial planning—strategic default and bankruptcy avoiding.
The Relationship between Reverse Mortgage Borrowing, Domain and Life Satisfaction by Cäzilia Loibl, Donald R. Haurin, Julia Brown, Stephanie Moulton :: SSRNOctober 19, 2018
Objectives: Reverse mortgages allow adults aged 62 and older to borrow against the equity in their homes without incurring monthly loan repayments.
This study examines the relationship of reverse mortgage borrowing with older adults’ satisfaction with their financial situation, housing, health, and daily life/leisure as well as with life as a whole.
Method: A new national data set of 1,088 older adults, comprised of loan data, credit histories, and responses to a phone survey, was created. Our estimation strategy compares reverse mortgage borrowers to older adults who obtained mandatory counseling but not a reverse mortgage.
Results: Reverse mortgage borrowers have significantly higher financial and housing satisfaction compared to non-borrowers; no differences were found for health, daily life/leisure, and general satisfaction. These satisfaction domains contribute differently to general satisfaction for reverse mortgage borrowers relative to non-borrowers: housing satisfaction has a greater influence for borrowers and health a greater influence for non-borrowers.
Discussion: Our study provides new knowledge about the longer-term outcomes of reverse mortgage borrowers. The positive association of reverse mortgage borrowing for housing and financial satisfaction and, in turn, general satisfaction, provides insights regarding borrower experiences with this controversial financial tool.
Numerous studies have examined the health effect of retirement, retirement behavior, and not having assets saved for retirement, however, few have analyzed the mental health effects of running out of money during retirement. This study examines the likelihood of having mental health issues in retirement when an individual runs out of money. This research article utilizes five waves of the Health and Retirement Study, spanning from 2006 through 2014. The result suggests that individuals who are going to run out of money two years from now have an increase in the probability of having mental health issues. However, there is an even further increase in the likelihood of mental health issues when the individual actually has actually run out of money. The larger the drop in asset level (ex. $25,000 down to below $1,000 vs $5,000 down to below $1,000) the large probability of having mental health issues. With the United States currently living longer and choosing to retire earlier there increased the risk of running out of money in retirement. Which leads to an increased risk of having mental health issues throughout retirement.
Rich Man, Poor Man: The Policy Implications of Canadians Living Longer by Kevin S. Milligan, Tammy Schirle :: SSRNSeptember 16, 2018
A longevity gap between rich and poor has persisted over the years in Canada with significant policy implications, according to a new report from the C.D. Howe Institute. In “Rich Man, Poor Man: The Policy Implications of Canadians Living Longer” – the first study of long-term changes in longevity across earnings groups in Canada – authors Kevin Milligan and Tammy Schirle provide new evidence on the incomes and life expectancy of Canadians.
Every Crisis Has a Silver Lining? Unravelling the Pro-Cyclical Pattern of Health Inequalities by Income by Max Coveney, Pilar Garcia-Gomez, Eddy van Doorslaer, Tom Van Ourti :: SSRNSeptember 15, 2018
It is well known that income and health are positively associated. Much less is known about the strength of this association in times of growth and recession. We develop a novel decomposition method that focuses on isolating the roles played by government transfers versus market transfers on changes in income-related health inequality (IRHI) in Europe. Using European Union Survey of Income and Living Conditions (EU-SILC) panel data for 7 EU countries from 2004 to 2013, we decompose the changes in IRHI while focusing on possible effects of the 2008 financial crisis. We find that such inequalities rise in good economic times and fall in bad economic times. This pattern can largely be explained by the relative stickiness of old age pension benefits compared to the market incomes of younger groups. Austerity measures are associated with a weakening of the IRHI reducing effect of government transfers.