ABSTRACT
This chapter illustrates the use of discrete-time duration models by analysing the impact of health on the decision to retire. Health is undoubtedly an important factor in the decision to retire. A recent survey for the Department for Work and Pensions (Humphrey et al. 2003) explored the factors affecting labour market participation among 2,800 people aged between 50 and 69.50% of the sample stated that they were not seeking work owing to ill health, and 20% reported that they had been forced to retire or leave a job because of ill health. However, the relationship between health and retirement is complex. It is difficult to estimate a true causal effect because health and work are jointly determined and there are problems finding an appropriate measure of health for use in this context. In order to usefully investigate the relationship it is necessary to use longitudinal data to enable us to track individuals from work into retirement, thus providing an appropriate counterfactual.
