Working life histories from SHARELIFE: a retrospective panel

This paper describes in detail the construction of the panel dataset spanning the entire working life of SHARELIFE respondents, discussing all the relevant assumptions needed to reshape the public release data into such a format. We then discuss how new research venues could stem from such a dataset and what distinguishes retrospective panel data from standard panel data

Age, Health and Life Satisfaction Among Older Europeans

In this paper we investigate how age affects the self-reported level of life satisfaction among the elderly in Europe. By using a vignette approach, we find evidence that age influences life satisfaction through two counterbalancing channels. On the one hand, controlling for the effects of all other variables, the own perceived level of life satisfaction increases with age. On the other hand, given the same true level of life satisfaction, older respondents are more likely to rank themselves as “dissatisfied” with their life than younger individuals. Detrimental health conditions and physical limitations play a crucial role in explaining scale biases in the reporting style of older individuals

Health and Labor Supply Dynamics of Older Married Workers

This empirical analysis investigates how the labor supply dynamics of married workers aged 46-65 is influenced by their own health conditions and by those of their cohabiting partners. Exploiting the information conveyed by the European Community Household Panel (1995-2001), our econometric specifications focus on the transition towards not employment within the next year and use alternative health indicators to describe the overall physical and mental conditions of couple members. We also control for partners labor supply because of its close relationship with their own health and the well-documented coordination with the labor market position of the other couple member. Our results show that while healthier individuals present higher chances of remaining at work in the future, living with healthier spouses affects positively the likelihood of ceasing from work. Finally, when the spouse is employed, the probability of keeping on working is estimated to rise. This last result upholds the hypothesis, suggested by the literature, that couple members prefer to spend their time in the same employment status

Estimating the Labor Supply Dynamics of Older Workers Using Repeated Cross-sections

The empirical analysis in this paper adopts logit models to study the hazard rate of ceasing from work by the next year for Italian older employees. The specifications are estimated resorting to the framework proposed by Guell and Hu (2006), which extracts information from repeated independent cross-sections to recover the hazard rate of interest at the individual level. The sample is drawn from the ISTAT survey Aspects of Everyday Life and includes employees aged 50-65 in 1993-2002. Our results show that, even conditioning on a wide set of socioeconomic factors, the age profile of the hazard rate is increasing and confirms the low labor market attachment of older workers. Further, the time evolution of the risk of becoming not employed appears to be hump-shaped and achieves its maximum for the cohorts of employees at work in the period 1996-1998, which is characterized by the introduction of important changes in the Social Security system aimed at extending the working life of the elderly

Essays on the Labor Supply Dynamics of Older Workers

The European Union laid out the Lisbon agenda in order to become "the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion". The fulfillment of this ambition should not discard the introduction of policies enhancing the economic participation of the elderly. In fact, lower fertility rates and increasing life expectancy have triggered the aging process of European population and are deeply altering its demographic structure. An aging society may exert larger pressure on the financial sustainability of pay-as-you-go pension systems owing to the decreasing age-profile of employment rates. On the one hand, the revenues coming from workers contributions to the scheme are expected to fall because a smaller fraction of individuals will be at work. On the other hand, the overall pension burden is expected to increase because a rising proportion of the population will be eligible for pension benefits. In view of these considerations, European Union fosters Social Security reforms which assure long-run financial equilibrium and fully take into account the ongoing demographic modifications. At the same time, such institutional changes should be accompanied by public programs aimed at extending the working life of the elderly. Indeed, stimulating the labor market participation of older workers is an ulterior strategy to alleviate the financial burden of Social Security because many of them who no longer find profitable the permanence in the labor market are likely to apply for retirement benefits. The development of policies aimed at achieving these purposes requires the support of analyses examining the labor supply dynamics of older workers. Throughout the thesis we will focus on transitions out of employment by considering elderly individuals at work in a given time period and describing their probability of becoming not employed in the future. In line with Blau (1994), we opt to estimate the dynamics of labor market position rather than imposing some arbitrary definition of retirement because the exit from the labor force may occur following alternative paths, such as becoming labor pensioners at the end of a full time job or starting an unemployment spell due to firm-downsizings that turn out to be a bridge towards ad-hoc early retirement arrangements. In order to preserve such heterogeneity, in this study workers are allowed to leave employment for whatever reason and to perform any possible employment trajectory. Chapter 1 studies the impact of Information and Communication Technology (ICT) skills on the probability of ceasing from work. The point at issue is of particular interest because the Lisbon agreements place the improvement and the diffusion of ICT knowledge among the priorities of the Union. Our work draws data from the waves 2000-2004 of the Bank of Italy Survey on Household's Income and Wealth. Remarkably, the questionnaire of the 2000 survey provides unique information to measure ICT knowledge at the individual level. In fact, respondents are asked to report the utilization of a PC at work and to rank their computer literacy according to a predefined scale. This distinction is useful to disentangle the effects of actual individual investments in ICT training from those due to implicit job requirements reflecting firm organization. The econometric specifications adopted allow for the potential endogeneity of technological knowledge in a labor supply framework. In fact, older individuals who plan to work longer may be more willing to enhance their skills as they face a longer period over which training costs can be recouped. Improvements in ICT skills are estimated to produce a positive effect on employment chances only for males with high education. This pattern corroborates the hypothesis of complementarity between educational attainments and technological knowledge (Weinberg, 2004). The literature provides a huge amount of evidence suggesting a positive relationship between individuals health and their own employment chances. Instead, few studies consider the role of the health conditions of other household members in the determination of the opportunity cost of keeping on working. Chapter 2 explores this research area by investigating how the labor supply dynamics of married workers is influenced by their own health conditions and by those of their cohabiting partners. Exploiting the European Community Household Panel (1995-2001), the overall psychophysical well-being of individuals is described by means of alternative indicators based on either self-assessments or more objective health indexes. Partners employment conditions are included among the explanatory factors because of their close relationship with health and the well-documented coordination between the labor market positions of couple members (Michaud, 2003). We also control for different sources of heterogeneity that may arise in our set-up and prevent us to estimate consistently the causal effects of interest. Our results confirm that healthier individuals are more prone to keep on working and, on the contrary, suggest that those living with a spouse in poor health are characterized by a higher propensity towards leaving employment. Finally, Chapter 3 deals with the study of labor market transitions when the use of panel datasets involves a number of major complications, for instance due to severe attrition, small sample size, short time-span covered or lack of relevant variables. Following the approach proposed in Güell and Hu (2006), we estimate the individual hazard rate of stopping working only resorting to repeated independent cross-sections representative of the same population. Although workers are not observed over time, we are still able to evaluate their own likelihood of becoming not employed by combining the labor market outcomes experimented in different time periods by individuals of the same birth-cohort. Drawing data from the ISTAT survey Aspetti della Vita Quotidiana (1993-2003), we recover the evolution of the risk of leaving employment in a period characterized by several pension system reforms. We propose evidence that while the Amato (1995) and Prodi (1997) reforms passed, the cohorts of older workers at time show the highest hazard rate of leaving employment. On the contrary, their counterparts in 2001 and 2002 are more likely to prolong their working life. These findings suggest that, in the short run, repeated institutional changes designed to lower the Social Security generosity actually induce an increase in the exit rate from the labor force

Technology, Skills and Retirement

Marco Fanno W.P. 42, Dipartimento di Scienze Economiche, Università di Padov

Income and Income Changes

The availability of longitudinal surveys is of fundamental importance to empirically assess how income reacts to age and other time-varying factors, most notably retirement. The second wave of SHARE thus helps shed light on how the socioeconomic characteristics of the elderly in Europe have evolved over time and evaluate the effects on income produced by such dynamics. The first important issue to investigate concerns the level and the adequacy of the income resources available to households and individuals. We stress in this chapter that an important role is played by household-level income sources, such as some welfare state benefits, imputed rent from owner-occupied housing and home-production of food. A second issue we investigate is how individual incomes are affected by retirement. We exploit the longitudinal nature of SHARE to investigate whether leaving the labour market entails a drop in income, and whether income changes are of similar magnitude among the retired as among the employed

Technology, Skills and Retirement

In our work we study the role of Information and Communication Technology (ICT) skills and their utilization in the retirement decision. We provide empirical evidence based on Italian panel data in favour of the hypothesis that - ceteris paribus - better educated male employees with ICT know-how retire later. Such effect is stronger the longer the time horizon considered, and its magnitude is remarkably larger than the one observed in US and Germany in previous studies. We also document that ICT do not play a crucial role in the retirement decision of women. Our results are robust to the estimation strategy adopted

The effect of work disability on the job involvement of older workers

This paper analyzes the effect of work disability on the job involvement of workers aged 50–65 living in Europe. We elicit a measure of job involvement from a question asking respondents to think about their job and declare whether they would like to retire as early as they can. We exploit objective health indicators and anchoring vignettes to enhance the comparability across individuals of work disability self-assessments. Individuals’ evaluations of their health-related work limitations are found to be mildly affected by justification bias but to depend on individual heterogeneity in reporting behaviour. Work disability significantly reduces the job involvement of workers. After controlling for individual fixed-effects and an extensive set of time-varying covariates, moving from the first to the third quartile of the work disability distribution is associated with a 8% increase (4 percentage points) in the probability of desiring to retire as soon as possible. The effect is larger for blue-collar workers. Justification bias and heterogeneity in reporting behaviour do not alter the magnitude of these effects

Life Insurance Investment and Stock Market Participation in Europe

In most European countries life insurance has played a key role in household portfolios, to the extent that it has often been the first asset ever purchased. In this paper we use life history data from a host of European countries to investigate the role of life insurance investment in shaping individuals’ attitudes towards participation in stocks and mutual funds. We show that individuals who purchased a life insurance policy are more likely to invest in stocks and mutual funds later. On the one hand, these findings support the notion that life insurance policies play an educational role in financial investment. On the other hand, they are also consistent with behavioural models where economic agents are first concerned with avoiding unacceptable adverse scenarios by purchasing low risk investments, such as life insurance policies, and then invest in riskier assets, such as stocks and mutual funds, to obtain higher economic returns