Modeling of the Relationship between Health and Employment of Russian People in Pensionable Age

<p>Russian pension system underwent great changes recently. At the end of 2013 a new law has been passed. One of the possibilities that it affords is postponement of the retirement in order to gain deferred retirement benefit. The analysis of its effectiveness is impossible without understanding of factors which made retirees continue their work. That&#39;s why this study is devoted to the analysis of labor supply of Russian people in pensionable age. The aim of this work is to answer the question if bad health is an important restriction for labor activity and if greater benefit is sufficient for the delay of retirement. This an empirical work, based on data of RLMS HSE for 2000-2010 years.</p><p>As self-reported health is usually considered to be an endogenous variable with working status a system of simultaneous equations has been estimated. Special attention has been paid to marginal effects of different variables and their changes over respondent&#39;s age. It was revealed that the most important factor is income, precisely pension benefits of the respondent. Many people in pensionable age are ready to work to improve their wealth. People with higher education are eager to preserve their standard of life till it&#39;s very end. For people with lower education this factor is less significant as their possibilities are much more limited. Bad health contribute to leaving from the labor force, but the effect is smaller than income&#39;s one. Thereby it seems that postponement of the retirement can be a useful option if retirement benefits increase considerably. Thought better strategy can be work and receive wages and retirement benefits at the same time. In this work effects of the restrictions from the demand side turned out to be insignificant. It is probably the result of variable choice as level of unemployment reflects only the probability of being employed while people in pensionable age can earn much less money for their work or be forced to be engaged in unskilled labor.</p>