Overview

Abstract (English)

Estimates of the impact of health on labour supply to quantify the returns to public and private investment in health vary widely for older men and are scarce for other groups. In addition, estimates using U.S. data confound differences in health insurance status that are correlated with both health and labour market outcomes. We provide new and more comprehensive estimates through an empirically tractable life cycle model of labour supply that also reflects the accumulation of health stock and estimate the model in the Canadian context of universal health insurance coverage. Our model identifies two important sources of bias in the estimation ofthe impact of health on labour supply: one arising from endogenous health status, and the other arising from unobserved effects or heterogeneity. Our model also identifies the econometric issues associated with the presence of nonemployment in life cycle labour supply behaviour. Using recent panel data from the Survey of Labour and Income Dynamics, we provide basic evidence on the links between health status and labour supply over the life cycle as well as econometric estimates from appropriate nonlinear models that account for the presence of unobserved (lifecycle) effects and endogenous health outcomes. Our results suggest that informaland cross-sectional evidence of a large health impact on labour supply are overstated because of endogenous health outcomes and the presence of unobserved effects, particularly for the widely studied group of older men. We estimate the health impact on labour supply to be on the order of only 4-6% for all age groups when endogeneity and unobserved effects are considered.SLID (Survey of Labour and Income Dynamics)

Abstract (French)

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