ISSN 2167-0439
International Journal of Management and Business Studies ISSN 2167-0439 Vol. 9 (12), pp. 001-009, December, 2019. © International Scholars Journals
Full Length Research Paper
Estimating the effect of stochastic health on employment, hours of work, and saving decisions
Chiang-Ming Chen* and Kuo-Liang Chang
1Department of Economics, National Chi Nan University, Nantou, Taiwan.
2Department of Economics, South Dakota State University, USA.
Accepted 20 August, 2019
Abstract
The object of this paper is to examine the empirical relationship between individuals’ perceived health uncertainty, labor inputs, and saving decisions. Most existing empirical studies treat health status as a known variable to individuals, thereby omitting health uncertainty in context of labor market outcomes. We distinguish our study by assuming a precautionary motivation for risk-averse individuals, to work harder and save more when facing the uncertainty of their health condition. We test this hypothetical relationship by applying the data collected from the 2003–2005 Panel Study of Family Dynamics (PSFD) in Taiwan. The study result indicates that while uncertainty over the health condition would discourage people from joining the labor market, those who are already in the labor market will input more working hours to earn extra income for the future consumption. In addition, stochastic health has a positive and significant effect on saving decision.
Key words: Health, stochastic health, labor supply, saving.