This paper examines the impact of self-reported work-limitation on the employment of
the Australian working age population. Five consecutive waves of the Household,
Income and Labour Dynamics in Australia (HILDA) Survey are used to investigate this
relationship. A two-equation dynamic panel data model demonstrates that persistence
and unobserved heterogeneity play an important role in the work-limitation reporting
and its effect on work. Unobserved factors that jointly drive work-limitation and work
are also shown to be crucial, especially for women.