SeaTE: Subjective ex ante Treatment Effect of Health on Retirement

Abstract

The paper studies the effect of health on work among older workers by eliciting two- and four-year-ahead subjective probabilities of working under alternative health states. These measures predict work outcomes. Person-specific differences in working probabilities across health states can be interpreted as Subjective ex ante Treatment Effects (SeaTEs) in a potential outcomes framework and as taste for work within a discrete choice dynamic programming framework. There is substantial heterogeneity in expectations of work conditional on health. The paper shows how heterogeneity in taste for work correlated with health can bias regression estimates of the effect of health on retirement. (JEL D84, I12, J14, J22, J26)

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