Seminar Vol. 122

Title: Occupational Retirement and Social Security Reform: the Roles of Physical and Cognitive Health 

Speaker: Jiayi Wen, Xiamen University

Time: December 21st, 2018 1:30–14:45

Venue: Conference Room 106B, Zhonghui Building (IESR, JNU College of Economics)

About the speaker:

Wen Jiayi is an Assistant Professor at the School of Economics, and Wang Yanan Institute for Studies in Economics (WISE), Xiamen University. He received his PhD in Economics from the CEMFI (Center for Monetary and Financial Studies, Spain), under the supervision of Pedro Mira, Manuel Arellano and Josep Pijoan-Mas.Wen Jiayi was a visiting scholar at Federal Reserve Bank of New York. His main research interests include labor economics, retirement and aging, and health economics.

Abstract:

Under skill-biased technical change, jobs are becoming less physically demanding whereas require increasing cognitive abilities. However, existing research does not pay sufficient attention on the retirement effect of cognitive health, nor the different roles of physical and cognitive health across occupations. This paper proposes and estimates a dynamic structural model of individual retirement and savings, allowing the retirement effects of physical and cognitive health to be occupation-dependent. The model is estimated on the U.S. Health and Retirement Study data by Indirect Inference. The counterfactual experiments suggest cognitive health has little retirement effect for manual workers. However, for clerical workers, the effect is almost as large as the one of physical health. Out of the four underlying channels: disutility of working, wage, medical expenditure, and mortality, disutility of working is the main one through which both physical and cognitive health affect retirement. Finally, if the full retirement age were to increase to 70, manual and clerical workers would correspond with larger delay in retirement and larger welfare loss than the professionals.