Essays in health, labor supply, and savings in later life

TitleEssays in health, labor supply, and savings in later life
Publication TypeThesis
Year of Publication2019
AuthorsLee, S
Academic DepartmentEconomics
Number of Pages185
UniversityUniversity of Wisconsin
CityMadison, WI
Thesis TypeDissertation
KeywordsEmployment and Labor Force, Health Conditions and Status, Savings

Chapter 1 examines married women's time allocation to market hours and spousal care in the event of their husbands' disability and its implications for evaluating the insurance value of the Social Security Disability Insurance (SSDI) program. Using an event study approach, I find that while spousal labor supply responses to husbands' disability are small, wives spend a sizable amount of time in spousal care after their husbands become disabled, and the magnitude of this response is comparable to the increase in wives' labor supply in the event of their husbands' layoff. Motivated by these facts, I develop a dynamic model of married households that incorporates husbands' disability status, wives' time allocation choices, health state dependent utility, and the institutional features of SSDI. Counterfactual experiments indicate that the insurance value of SSDI relative to its costs is considerably higher when I take into account that spousal care significantly reduces the insurance role of wives' labor supply in the event of their husbands' disability.

Chapter 2 is joint with Kegon K. T. Tan. We exploit an unanticipated change in Social Security benefits, commonly called the Social Security Notch, to distinguish bequest motives from precautionary savings. Our instrumental variable estimates show that an increase in benefits leads to a sizable increase in bequest amounts. Combining these estimates with a model of late-life savings behavior, we find that roughly two-fifths of accumulated assets and bequests are attributable to bequest motives among retirees. A more progressive Social Security benefits schedule that reduces benefits for the richest retirees has a modest impact on consumption since wealth acts as a cushion against benefit reduction.

Chapter 3 studies the reasons behind why self-employment rates increase with age. I compare among three mechanisms that make self-employment more attractive to older workers than younger workers: 1) accumulated work experience that can be tailored into a feasible business idea, 2) greater difficulty in finding a wage-and-salary job once laid off, and 3) flexibility in working hours. I find that flexible working hours is the most important element in understanding transitions to self-employment and longer labor force attachment of self-employed workers.

Citation Key10113