Essays on the Economics of Aging and Education

This dissertation examines several key questions concerning school choice and the retirement and employment behavior of older workers while paying special attention to the potential biases resulting from unobserved heterogeneity. This first essay investigates the phenomenon of involuntary job loss among workers over the age of 50 by providing estimates of a dynamic job search model applied to a sample of displaced workers in the Health and Retirement Study (HRS). The estimated models imply that reservation wages are low in comparison to the distribution of observed wages, particularly for full-time jobs. Simulations indicate that both market opportunities and age-related preferences for leisure are responsible for the observed unemployment durations. In the second essay I use data from the HRS to study the effects of employer-provided retiree health insurance (EPRHI) on retirement behavior. I find that EPRHI increases transitions out of employment for those nearing age 65. Similarly, access to EPRHI encourages subsequent retirement for those who have experienced an involuntary job loss. These findings are robust to controls for worker heterogeneity, job characteristics such as workplace flexibility, and changes in assets, pension availability, and earnings opportunities. Failing to control for heterogeneity and job characteristics overstates the impact of EPRHI on labor force transitions. In the third essay I examine the validity of three instrumental variables intended to overcome problems due to unobserved heterogeneity in estimating the effects of Catholic schools on a wide variety of outcomes. Three separate methodologies suggest that religious affiliation, proximity to Catholic schools, and the interaction between these two measures are not useful sources of identification of the Catholic school effect, at least in currently available data. In particular, the potential biases in 2SLS estimates are substantial. The discrepancy between these results and previous estimates of Catholic schooling effects stem in part from functional form assumptions that appear to be playing a larger role in identification than the exclusion restrictions.

Education, Adult and Continuing (0516)

5004

ISBN 0-493-65005-9