Subjective Health Assessments and Active LaborMarket Participation of Older Men: Evidence froma Semiparametric Binary Choice Model withNonadditive Correlated Individual-Specific Effects

We use panel data from the US Health and Retirement Study 1992-2002 to estimate theeffect of self-assessed health limitations on active labor market participation of men aroundretirement age. Self-assessments of health and functioning typically introduce anendogeneity bias when studying the effects of health on labor market participation. Thisresults from justification bias, reflecting an individual’s tendency to provide answers which"justify" his labor market activity, and individual-specific heterogeneity in providing subjectiveevaluations...