Date of Award

8-16-2014

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

James Marton

Second Advisor

Shiferaw Gurmu

Third Advisor

Barry Hirsch

Fourth Advisor

Angie Snyder

Abstract

The essays in this dissertation explore issues related to health and retirement of older Americans, using longitudinal data on older Americans from ten waves of the Health and Retirement Study (1992-2010).

The first essay explores the effect of both subjective and relatively more objective physical and mental health conditions on the probability of exit from full-time employment. Eight health indices (factors) are created from a wide range of health measures by principal component analysis. The effect of these health factors on the time until exit from full-time employment is empirically examined in a proportional hazard model. Single and competing risk specifications are estimated that allow for multiple spells of full-time employment and control for unobserved heterogeneity. The main results suggest that increase in functional limitation factor makes an individual more likely to exit via any route in general and the complete retirement route in particular. For mental health problems, increase in the depression factor increases the likelihood of exit from full-time employment via the complete retirement, part-time work and unemployment routes. While increase in cognitive disorders factor has no significant effect on the likelihood of exit via complete retirement, but increases the likelihood of exit via the disability route. These results have implications for public policies targeted towards retaining older workers within the labor market.

The second essay examines the effect of retirement on post retirement physical and mental health and the extent to which the effects differ across these different health outcomes. The inherent issue of reverse causality between health and retirement that leads to endogeneity is addressed by using multiple sample stratification and instrumental variable estimation strategies. The stratified samples include individuals who are physically and mentally healthy prior to their retirement so that pure effect of retirement on post retirement health may be found. Five different instruments for complete retirement are also used to deal with endogeneity. The sample stratification results unanimously indicate that complete retirement has adverse effect on post retirement physical and mental health. While the instrumental variables approach results are mixed and are based on the choice of instrument for complete retirement.

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