Influence of health on labour market transitions

Due to the economic crisis, labour market transitions have become an even larger topic of interest for a lot of actors in the field of employment. The effect of health on labour market transitions has been quantified several times, but only for the individuals who are close to retiring. In this thesis an effort was made to assess the effect of health on labour transitions to work, but also to non-employment. By correcting for the effect of health on the transitions by using several demographic, health-, household- and job characteristics, the influence of health has been quantified. The dataset used for this model is the Dutch Household Survey, which consists of 18 waves. Additional to the variables, we added region and time dummies. Due to the fact that we look at transitions and the binary dependent variable we used a logit model, but also a linear probability fixed effects model to correct for the unobserved heterogeneity. The outcomes of the marginal effects showed that health did influence the transition to employment. The probability of an individual to transition to work is 2.4 percentage points higher when someone reports that he has good health, compared with someone who has reported to have bad health. This is only the case when an individual belonged to the age category 50+. Self-assessed health also influenced the transition to non-employment by decreasing the probability by 8.8 percentage points for someone with good health in the younger age category, compared to people with bad health ceteris paribus.