The major objective of this research is the development and estimation of behavioral models of aging and income security. The increasing incidence of poor health with aging alters both the individual's ability to supply labor to the market and the demand by employers for that labor, with obvious, adverse effects on earnings and family income. The public response in the form of social insurance for the disabled and aged moderates the decline in family income with age and poor health but, at the same time, may discourage work activity and the normal functioning of this age group. The proposed research is designed to define more precisely the labor market and government transfer incentives which affect the individual's choices of work activity and transfer program participation and to analyze the behavior of aged individuals subject to these constraints within a stochastic decision framework with random health effects. The labor market for older individuals is more complex than simple wage auction models suggest. A number of employment policies prevalent in large firms that discourage continued employment, e.g. (where legal) mandatory retirement and actuarially unfair pensions. Such employment practices induce increased job separation but not necessarily retirement since the individual may secure employment in other firms. A major focus of this research will be the theoretical and empirical analysis of the subsequent job mobility and work behavior of older males who """"""""retire from their regular jobs."""""""" Small firms and self-employment provide a disproportionate share of the employment opportunities of retirement aged workers and will receive special attention in the analysis. Social insurance against earnings losses due to disability and aging form another part of the incentive structure within which the aging individual's behavior and family income is determined. In this research the disability and retirement programs are treated as two aspects of a single insurance scheme against earnings loss due to poor health and disability. The optimal integration of an age-tested and health-tested program will be developed. The National Logitudinal Surveys of Older Males will be used to develop estimates of the sensitivity of older male work effort to the incentives provided by the combined programs.
