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The Impact of Health on Labor Supply Near Retirement
WP 2017-364
Richard Blundell, Jack Britton, Monica Costa Dias, and Eric French 

  • We find that objective and subjective health measures deliver similar estimates if a sufficiently large set of objective measures is used. Controlling for only a limited number of health conditions, however, may significantly reduce the estimated impact of health on employment.
  • We find that a single health index, while sometimes rejected from a statistical standpoint, produces estimates of health’s effect on employment that are similar to those obtained using multiple health indexes. Using objective measures to instrument for subjective measures also produces similar, although slightly larger estimates.
  • We find that properly accounting for heterogeneity in background characteristics by controlling for initial conditions is a more important modeling issue than the choice of the health measure.
  • Although cognition is significantly related to employment, we find that it has little added explanatory power once we also control for health.
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