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Date
Jun
06
2006

Impact of Obesity on Labor Market Outcomes of the Elderly

Presenter:

Francesco Renna

Authors:

Francesco Renna, Nidhi Thakur

Chair: Don Kenkel; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 121

Rationale: With increased longevity, the population of the retired is increasing at a fast pace. It is thus important to understand the factors that might lead to an even earlier onset of retirement than the usual 65th year of life. Since health is often cited as one such factor, it becomes imperative to understand how different constituents of health affect the labor market decisions of the elderly. We believe that obesity can impact employment decisions directly by creating functional disabilities, and/or indirectly by aggravating or actually causing other health ailments which can in turn impact employment status. While the impact of obesity along these two lines can be seen in almost all ages, amongst the elderly obesity can act as a catalyst in the labor market exit decisions, since ‘retirement’ is a concept much in their horizon than in the horizon of the younger obese.

Objectives: The objective of this paper is to estimate the direct and indirect impact of obesity on the labor market decisions of the older population.

Methodology: BMI varies from 18.5 for normal individuals to more than 40 for extremely obese. We compute the BMI for a sample of older workers, and then look at how changes in BMI affect their labor market outcomes for the next 8 years, during which time they make one of three choices: they either take an early retirement, apply for a DI/SSI benefit or change the number of hours worked. Each of these decisions is mutually exclusive, allowing for a multinomial logit approach. We also understand that since obesity is to a large extent also a self-control issue, it is possible that decisions regarding the labor market, like number of hours supplied, retirement or applying for DI assistance might be affected by the same time preferences of the individual which affect consumption decisions and subsequently affect the body weight. Thus in addition to controlling for various socio-economic characteristics of the older worker we also allow for individual heterogeneity through fixed effects. To estimate the direct and indirect impact of obesity, we control for physical or mental illnesses and their interaction with BMI. The data comes from the HRS.

Results: Preliminary analysis suggests that higher BMI increases DI applications and the probability of working part time. The effect of BMI on employment is ambiguous: BMI may decrease employment because obesity is generally associated with an increase of chronic conditions. Still, many obese might have an incentive to not retire till 65, since they do not qualify for Medicare and they are more likely to need medical assistance. We also expect to find that disability associated with physical illness may be smaller than recent statistics suggest after accounting independently for the role of obesity.

Conclusions: The paper suggests that obesity plays an important role in the late work life of elderly workers because of its effects on physical mobility and chronic conditions that determine the probability a worker will apply for DI, may need medical assistance, and ultimately withdraw from the labor force.

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