The Dynamics of Health Changes and Employment Transitions among the Elderly

This paper explores the interrelation between health changes and employment transitions among the elderly in rural China. Using the China Health and Retirement Longitudinal Study, we examine how changes in health are associated with two different state transitions: continued employment and labor market re-entry. Our results suggest that adverse changes in self-reported health status and disability are significantly associated with lower probability of labor market participation: either in the form of continued employment or workforce re-entry. Significant correlations can also be found between family composition and work transitions. The simulation we conduct shows that the magnitudes of adjustments in both of the work transition probabilities are large in response to health changes. There is also some evidence suggesting that the participation responses of individuals to health shocks are asymmetric. In addition, we find that the extent to which health changes are linked to employment transitions varies for individuals with different types of jobs and educational attainments.