How do sudden large losses in wealth affect labor force participation?

The authors assess whether the sudden large losses in household wealth due to recent declines in stock and home values have significantly affected the U.S. labor market. They find that the overall labor force participation rate would be 0.7 percentage points lower were it not for the declines in the values of stocks and houses over the 2006–10 period.Labor mobility ; Wealth ; Labor market ; Households

The effect of disability insurance receipt on labor supply

This paper estimates the effect of the Disability Insurance program on labor supply. We find that 30% of denied applicants and 15% of allowed applicants work several years after a disability determination decision. The earnings elasticity with respect to the after tax wage is 0.8. However, the labor supply of those over age 55, college graduates, and those with mental illness is not sensitive to allowance of benefits.Disability insurance ; Labor supply

The effects of progressive taxation on labor supply when hours and wages are jointly determined

This paper extends a standard intertemporal labor supply model to account for progressive taxation as well as the joint determination of hourly wages and hours worked. We show, qualitatively and quantitatively, that these two factors have important implications for estimating the intertemporal elasticity of substitution. Furthermore, we show how to use this corrected parameter to interpret the labor supply response to a tax change. Failure to account for wage-hours ties within a progressive tax system leads to an hours response to a change in marginal tax rates that may be biased downwards by as much as 10 percent for men and 17 percent for women.Taxation ; Labor supply ; Wages

The Effects of Health Insurance and Self-Insurance on Retirement Behavior

This paper provides an empirical analysis of the effect of employer-provided health insurance and Medicare in determining retirement behavior. Using data from the Health and Retirement Study, we estimate the first dynamic programming model of retirement that accounts for both saving and uncertain medical expenses. Our results suggest that uncertainty and saving are both important. We find that workers value health insurance well in excess of its actuarial cost, and that access to health insurance has a significant effect on retirement behavior, which is consistent with the empirical evidence. As a result, shifting the Medicare eligibility age to 67 would cause a significant retirement delay--as large as the delay from shifting the Social Security normal retirement age from 65 to 67.

Analyzing the relationship between health insurance, health costs, and health care utilization

Using data the Health and Retirement Survey and the Assets and Health Dynamics among the Oldest Old, this article provides an empirical analysis of the determinants of whether an individual purchases health insurance. The authors describe the relationship between health costs and health care utilization of individuals aged 50 and explore how these factors vary with access to health insurance.Medicare ; Medical care, Cost of

Identification of models of the labor market

This chapter discusses identification of common selection models of the labor market. We start with the classic Roy model and show how it can be identified with exclusion restrictions. We then extend the argument to the generalized Roy model, treatment effect models, duration models, search models, and dynamic discrete choice models. In all cases, key ingredients for identification are exclusion restrictions and support conditions.Labor market

On the Distribution and Dynamics of Health Costs

Using data from the Health and Retirement Survey (HRS) and Assets and Health Dynamics of the Oldest Old (AHEAD), this paper presents estimates of the stochastic process that determines both the distribution and dynamics of health costs. We find that the data generating process for health costs is well represented by an ARMA(1,1). Furthermore, innovations to this process are close to lognormally distributed. In any given year, .1% of our sample receives a health cost shock that costs at least $80,000 in present value. Lastly, we discuss the accuracy of numerical solutions when integrating over health costs. Assuming lognormality, simple approximation rules work well.

The effect of the run-up in the stock market on labor supply

This article presents estimates of the effect of the run-up in the stock market on labor supply. The authors find that, in the absence of a run-up in the stock market, aggregate labor force participation rates would have been about 1 percent higher than they are today.Labor supply ; Stock market