Income, Employment and Health Risks of Older Workers

Wei, Siqi

Publication:
Income, Employment and Health Risks of Older Workers

dc.contributor.author	Wei, Siqi
dc.contributor.funder	Ministerio de Economía, Industria y Competitividad
dc.contributor.funder	María de Maeztu Programme for Units of Excellence in R&D
dc.contributor.ror	https://ror.org/02jjdwm75
dc.date.accessioned	2025-04-07T10:42:39Z
dc.date.available	2025-04-07T10:42:39Z
dc.date.issued	2022-07
dc.description.abstract	This paper begins with the observation that many olderworkers move to "bridge" jobs with lower wages and fewer working hours before exiting the labor force for good. To explain this gradual transition to full retirement, I propose a nonlinear agingrelated shock — mismatch shock, which mismatches workers with their existing job and triggers job leaves. I develop an empirical framework of employment and job transitions jointly with stochastic wage and hour processes to separate health risks, individual-specific productivity risks, firm-specific mismatch risks, quality of outside offers, and job destruction risks faced by older workers. The model is estimated with a sample of male individuals aged 51 to 70 in the US Health and Retirement Study applying a novel parameter-expanded stochastic EM algorithm. The paper finds that mismatch shocks play an important role in explaining the reduction in wages and hours for movers. Furthermore, I calculate the welfare cost of risks and quantify how much individuals value the possibility of a flexible transition to full retirement by constructing a utility-based structural model of consumption, employment and job movements where agents face the same risks as in the empirical model. The model is estimated using a novel simulation-based algorithm that exploits the connection to the empirical model and the estimates from the empirical model. The results show that the median cost of mismatch risks amounts to a reduction in consumption flow by 5?3%-7?1% depending on the education group. Banning job changes and re-entry causes a welfare loss equivalent to a consumption drop of 12% 4%.
dc.description.peerreviewed	yes
dc.description.status	Published
dc.format	application/pdf
dc.identifier.citation	Wei, S. (2022). Income, employment and health risks of older workers (No. wp2022_2205).
dc.identifier.uri	https://hdl.handle.net/20.500.14417/3708
dc.language.iso	en
dc.publisher	Centro de Estudios Monetarios y Financieros
dc.relation.department	Economics
dc.relation.entity	IE University
dc.relation.projectID	BES-2017- 082506
dc.relation.projectID	MDM-2016-0684
dc.relation.school	IE Business School
dc.rights	Attribution-NonCommercial-NoDerivatives 4.0 International
dc.rights.accessRights	info:eu-repo/semantics/openAccess
dc.rights.uri	https://creativecommons.org/licenses/by-nc-nd/4.0/deed.en
dc.subject.keyword	Income risks
dc.subject.keyword	Health risks
dc.subject.keyword	Mismatch
dc.subject.keyword	Bridge jobs
dc.subject.keyword	Latent variables.
dc.title	Income, Employment and Health Risks of Older Workers
dc.type	info:eu-repo/semantics/workingPaper
dc.version.type	info:eu-repo/semantics/publishedVersion
dspace.entity.type	Publication
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