Direct and indirect effects of obesity on U.S. labor market outcomes of older working age adults

In this paper, we study the impact of obesity on labor market decisions of older working age adults in USA. Labor market outcomes are defined as any one of three: working; not working due to a disability; or not working due to an early retirement. Based on existing medical literature, we deduce that obesity can largely impact labor market decisions directly through impairment of bodily functions and indirectly by being a risk factor for various diseases like hypertension, arthritis, etc. We use data from the US Health and Retirement Study on older adults who were no more than 64 years of age in 2002. In our modeling effort, we employ two estimation strategies. We first estimate a model in which employment outcome in 2002 is a function of weight status in 1992. In the second strategy, controlling for time-invariant individual heterogeneity, we first consider the impact of obesity on bodily impairments and chronic illnesses; then, we consider the impact of such impairments and illnesses on labor market outcomes. Our results indicate that, for men, obesity class 2 and 3 increases both the probability of taking an early retirement and the incidence of disability by 1.5 percentage points. For women, we find that obesity class 2 and 3 increases the probability of taking an early retirement by 2.5 percentage points and the incidence of disability by 1.7 percentage points.