Advanced Search
MyIDEAS: Login to save this paper or follow this series

Retirement and Subjective Well-Being

Contents:

Author Info

  • Bonsang, Eric

    ()
    (ROA, Maastricht University)

  • Klein, Tobias J.

    ()
    (Tilburg University)

Abstract

We provide an explanation for the common finding that the effect of retirement on life satisfaction is negligible. For this we use subjective well-being measures for life and domains of life satisfaction that are available in the German Socio-Economic Panel (GSOEP) and show that the effect of voluntary retirement on satisfaction with current household income is negative, while the effect on satisfaction with leisure is positive. At the same time, the effect on health satisfaction is positive but small. Following the life domain approach we then argue that these effects offset each other for an average individual and that therefore the overall effect is negligible. Furthermore, we show that it is important to distinguish between voluntary and involuntary retirement. The effect of involuntary retirement is negative because the adverse effect on satisfaction with household income is bigger, the favorable effect on satisfaction with leisure is smaller, and the effect on satisfaction with health is not significantly different from zero. These results turn out to be robust to using different identification strategies such as fixed effects and first differences estimation, as well as instrumental variables estimation using eligibility ages and plant closures as instruments for voluntary and involuntary retirement.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.iza.org/dp5536.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5536.

as in new window
Length: 40 pages
Date of creation: Feb 2011
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization, 2012, 83 (3), 311-329
Handle: RePEc:iza:izadps:dp5536

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: subjective well-being; satisfaction measurement; retirement;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Susann Rohwedder, 2009. "Mental Retirement," Working Papers 711, RAND Corporation Publications Department.
  2. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
  3. Layard, R. & Mayraz, G. & Nickell, S., 2008. "The marginal utility of income," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1846-1857, August.
  4. Salm, M., 2009. "Does job loss cause ill health?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3736383, Tilburg University.
  5. Easterlin, Richard A., 2006. "Life cycle happiness and its sources: Intersections of psychology, economics, and demography," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 463-482, August.
  6. Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
  7. Bernard M.S. van Praag, 2007. "Perspectives from the Happiness Literature and the Role of New Instruments for Policy Analysis," Tinbergen Institute Discussion Papers 07-049/3, Tinbergen Institute.
  8. Bonsang, Eric & Adam, Stéphane & Perelman, Sergio, 2012. "Does retirement affect cognitive functioning?," Journal of Health Economics, Elsevier, vol. 31(3), pages 490-501.
  9. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  10. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  11. Michael Hurd & Susann Rohwedder, 2005. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 242, RAND Corporation Publications Department.
  12. Andrew E. Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2008. "Lags And Leads in Life Satisfaction: a Test of the Baseline Hypothesis," Economic Journal, Royal Economic Society, vol. 118(529), pages F222-F243, 06.
  13. repec:dgr:uvatin:2002018 is not listed on IDEAS
  14. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-38, October.
  15. Finkelstein, Amy N. & Luttmer, Erzo F. P. & Notowidigdo, Matthew J., 2009. "Approaches to Estimating the Health State Dependence of the Utility Function," Working Paper Series rwp09-002, Harvard University, John F. Kennedy School of Government.
  16. Blau, David M., 2007. "Retirement and Consumption in a Life Cycle Model," IZA Discussion Papers 2986, Institute for the Study of Labor (IZA).
  17. Andrew Clark & Yannis Georgellis & Peter Sanfey, 1999. "Scarring: The Psychological Impact of Past Unemployment," Studies in Economics 9903, Department of Economics, University of Kent.
  18. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," Working Papers 97035, Stanford University, Department of Economics.
  19. Steven Haider & Melvin Stephens Jr., 2004. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," NBER Working Papers 10257, National Bureau of Economic Research, Inc.
  20. Easterlin, Richard A. & Sawangfa, Onnicha, 2007. "Happiness and Domain Satisfaction: Theory and Evidence," IZA Discussion Papers 2584, Institute for the Study of Labor (IZA).
  21. Bernard M. S. van Praag & P. Frijters & Ada Ferrer-i-Carbonell, 2001. "The Anatomy of Subjective Well-Being," Discussion Papers of DIW Berlin 265, DIW Berlin, German Institute for Economic Research.
  22. repec:hal:wpaper:halshs-00566855 is not listed on IDEAS
  23. Norma B. Coe & Gema Zamarro, 2008. "Retirement Effects on Health in Europe," Working Papers 588, RAND Corporation Publications Department.
  24. Fabrizio Mazzona & Franco Peracchi, 2010. "Ageing, cognitive abilities and retirement," EIEF Working Papers Series 1015, Einaudi Institute for Economics and Finance (EIEF), revised Jan 2012.
  25. Eric French, 2004. "The Effects of Health, Wealth and Wages on Labor Supply and Retirement Behavior," 2004 Meeting Papers 96, Society for Economic Dynamics.
  26. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  27. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  28. Kevin Neuman, 2008. "Quit Your Job and Get Healthier? The Effect of Retirement on Health," Journal of Labor Research, Springer, vol. 29(2), pages 177-201, June.
  29. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
  30. Hullegie P & Klein TJ, 2009. "The effect of private health insurance on medical care utilization and self-assessed health in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 09/17, HEDG, c/o Department of Economics, University of York.
  31. Ravallion, Martin & Lokshin, Michael, 2001. "Identifying Welfare Effects from Subjective Questions," Economica, London School of Economics and Political Science, vol. 68(271), pages 335-57, August.
  32. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  33. Andrew E. Clark & Yarine Fawaz, 2009. "Valuing jobs via retirement: European evidence," PSE Working Papers halshs-00566855, HAL.
  34. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  35. Bernard M.S. van Praag & Paul Frijters, 1999. "The measurement of welfare and well-being; the Leyden approach," School of Economics and Finance Discussion Papers and Working Papers Series 071a, School of Economics and Finance, Queensland University of Technology.
  36. Bender, Keith A., 2012. "An analysis of well-being in retirement: The role of pensions, health, and ‘voluntariness’ of retirement," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 424-433.
  37. John Laitner & Dan Silverman, 2005. "Estimating Life—Cycle Parameters from Consumption Behavior at Retirement”," Working Papers wp099, University of Michigan, Michigan Retirement Research Center.
  38. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers B 03-2001, ZEI - Center for European Integration Studies, University of Bonn.
  39. Coe, N.B. & Lindeboom, M., 2008. "Does Retirement Kill You? Evidence from Early Retirement Windows," Discussion Paper 2008-93, Tilburg University, Center for Economic Research.
  40. Schwerdt, Guido, 2005. "Why does consumption fall at retirement? Evidence from Germany," Economics Letters, Elsevier, vol. 89(3), pages 300-305, December.
  41. Lindeboom, Maarten & Portrait, France & van den Berg, Gerard, 2002. "An econometric analysis of the mental-health effects of major events in the life of older individuals," Working Paper Series 2002:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  42. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 59-80, Summer.
  43. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  44. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  45. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
  46. Frijters, Paul, 2000. "Do individuals try to maximize general satisfaction?," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 281-304, June.
  47. Bernard M.S. van Praag & Ada Ferrer-i-Carbonell, 2002. "Life Satisfaction Differences between Workers and Non-Workers - The Value of Participation per se," Tinbergen Institute Discussion Papers 02-018/3, Tinbergen Institute.
  48. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  49. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Clemens Hetschko & Andreas Knabe & Ronnie Schöb, 2014. "Looking Back in Anger? Retirement and Unemployment Scarring," CESifo Working Paper Series 4784, CESifo Group Munich.
  2. Clemens Hetschko & Andreas Knabe & Ronnie Schöb, 2011. "Changing Identity: Retiring from Unemployment," CESifo Working Paper Series 3540, CESifo Group Munich.
  3. Caroli, Eve & Bassanini, Andrea, 2014. "Is work bad for health? The role of constraint vs choice," Economics Papers from University Paris Dauphine 123456789/12483, Paris Dauphine University.
  4. Marzieh Abolhassani & Rob Alessie, 2013. "Subjective Well-Being Around Retirement," De Economist, Springer, vol. 161(3), pages 349-366, September.
  5. Martin Binder & Alex Coad, 2014. "Heterogeneity in the Relationship between Unemployment and Subjective Well-Being: A Quantile Approach," Economics Working Paper Archive wp_808, Levy Economics Institute.
  6. Sahlgren, Gabriel H., 2012. "Work ‘til You Drop: Short- and Longer-Term Health Effects of Retirement in Europe," Working Paper Series 928, Research Institute of Industrial Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp5536. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.