An empirical assessment of assortative matching in the labor market

In labor markets with worker and firm heterogeneity, the matching between firms and workers may be assortative, meaning that the most productive workers and firms team up. We investigate this with longitudinal population-wide matched employer-emplyee data from Portugal. Using dynamic panel data methods, we quantify a firm-specific productivity term for each firm, and we relate this to the skill distribution of workers in the firm. We find that there is positive assortative matching, in particular among long-lived firms. Using skill-specific estimates of an index of search frictions, we find that the results can only to a small extent be explained by heterogeneity of search frictions across worker skill groups.Positive assortative matching; matched employer-employee data; productivity; skill; unobserved heterogeneity; sorting; fixed effects

Persistencies in the Labour Market

Using longitudinal income-tax registers, we study how past labour market outcomes affect current labour market transition rates. We focus on hysteresis effects of the durations and incidence of previous spells out of work. We estimate flexible multi-state Mixed Proportional Hazard specifications for transition rates between employment, unemployment, and welfare/non-participation. Our main finding is that after longer periods of employment with high income, individuals' transition rates from unemployment to employment increase. Longer periods of non-employment generally decrease future transition rates to work, and sometimes also from work. The quantitative magnitude of persistency and hysteresis effects on inequality is modest.duration analysis, hysteresis, inequality, wages, unemployment, hazard rates, employment, income, work

The Role of Early-Life Conditions in the Cognitive Decline due to Adverse Events Later in Life

Cognitive functioning of elderly individuals may be affected by events such as the loss of a (grand)child or partner or the onset of a serious chronic condition, and by negative economic shocks such as job loss or the reduction of pension benefits. It is conceivable that the impact of such events is stronger if conditions early in life were adverse. In this paper we address this using a Dutch longitudinal database that follows elderly individuals for more than 15 years and contains information on demographics, socio-economic conditions, life events, health, and cognitive functioning. We exploit exogenous variation in early-life conditions as generated by the business cycle. We also examine to what extent the cumulative effect of consecutive shocks later in life exceeds the sum of the separate effects, and whether economic and health shocks later in life reinforce each other in their effect on cognitive functioning.cognitive functioning, business cycle, bereavement, developmental origins, retirement, health, long-run effects, dementia

Health and Work of the Elderly: Subjective Health Measures, Reporting Errors and the Endogenous Relationship between Health and Work

This paper aims to explore the interrelation between health and work decisions of elderly workers, taking the various ways in which health and work can influence each other explicitly into account. For this, two issues are of relevance. Self-assessed health measures are usually at hand in empirical analyses and research indicates that these may be endogenous, state dependent, reporting behaviour. Furthermore, even if an objective health measure is used, it is not likely to be strictly exogenous to labour market status or labour income. Health and labour market variables are correlated because of unobserved individual-specific characteristics (e.g., investments in human capital and health capital) Moreover, one?s labour market status is expected to have a (reverse) causal effect on health. A solution to the ?Health and Retirement Nexus? requires an integrated model for work decisions, health production and health reporting mechanisms. We formulate such a model and estimate it on a longitudinal dataset of Dutch elderly

The effects of intelligence and education on the development of dementia

A number of recent epidemiological studies have shown that the prevalence and incidence of dementia are increased in population strata with low compared to high levels of education. This has been explained as a consequence of a greater 'brain reserve capacity' in people with a high level of education. Theoretically, however, brain reserve capacity is better reflected by intelligence than by level of education. Thus, the emergence of dementia will be better predicted by low pre-morbid intelligence than by low education. This prediction was tested in a population based sample of elderly subjects (N = 2063; age range 65-84; Amsterdam Study of the Elderly) who were followed over 4 years. Dementia was diagnosed using the Geriatric Mental State examination (GMS). Pre-morbid intelligence was measured using the Dutch Adult Reading Test (DART), a short reading test which gives a good estimate of verbal intelligence, and is relatively insensitive to brain dysfunction. The effects of age, gender, occupational level, number of diseases affecting the central nervous system and family history of dementia or extreme forgetfulness were also examined. Logistic regression analysis showed that low DART-IQ predicted incident dementia better than low level of education. A high occupational level (having been in charge of subordinates) had a protective effect. This result supports the brain reserve theory. It also indicates that low pre-morbid intelligence is an important risk factor for cognitive decline and dementia. Use of reading ability tests is to be preferred over years of education as estimator of pre-morbid cognitive level in (epidemiological) dementia researc

An Econometric Analysis of the Mental-Health Effects of Major Events in the Life of Elderly Individuals

Major events in the life of an elderly individual, such as retirement, a significant decrease in income, death of the spouse, disability, and a move to a nursing home, may affect the mental health status of the individual. For example, the individual may enter a prolonged depression. We investigate this using unique longitudinal panel data that track labor market behavior, health status, and major life events, over time. To deal with endogenous aspects of these events we apply fixed effects estimation methods. We find some strikingly large effects of certain events on the occurrence of depression. We show that the results are of importance for the design of health care and labor market policy towards the elderly