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Economic Conditions at the Time of Birth and Cognitive Abilities Late in Life: Evidence from Eleven European Countries

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Author Info

  • Doblhammer, Gabriele

    ()
    (University of Rostock)

  • van den Berg, Gerard J.

    ()
    (University of Mannheim)

  • Fritze, Thomas

    ()
    (Rostock Center for the Study of Demographic Change)

Abstract

With ageing populations and a stronger reliance on individual financial decision-making concerning asset portfolios, retirement schemes, pensions and insurances, it becomes increasingly important to understand the determinants of cognitive ability among the elderly. Macro-economic recession and boom periods provide a unique opportunity to study the effect of changes in the early life economic environment on late life cognition. In European countries, about three to four economic recession and boom periods can be identified between 1900 and 1945. The timing of these periods differs between the countries, which makes a cross-country study design particularly powerful, as it is insensitive to country-specific confounding factors. We use data from the Survey of Health, Aging and Retirement in Europe (SHARE) among elderly individuals. This survey is homogeneous across countries. We use almost 20,000 respondents from 11 countries. We examine several domains of cognitive functioning at ages 60+ and link them to the macro-economic deviations in the year of birth, controlling for current demographic, socioeconomic and health status. We find that being born during a recession or boom period significantly influences cognitive functioning late in life in various domains. The effects are particularly pronounced among the less educated. Boom periods positively influence numeracy and verbal fluency as well as the score on the omnibus cognitive indicator. The results are robust; controlling for current characteristics does not change effect sizes and significance. We conclude that cognitive functioning late in life is influenced by economic conditions in the year of birth, and we discuss possible causal pathways.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5940.

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Length: 48 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5940

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Keywords: memory; numeracy; cognition; economic business cycle; health; developmental origins; long-run effects; dementia; decision-making;

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References

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  1. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," NBER Working Papers 13810, National Bureau of Economic Research, Inc.
  2. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2006. "Cognitive Abilities and Portfolio Choice," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5735, C.E.P.R. Discussion Papers.
  3. Gordon B. Dahl & Lance Lochner, 2012. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," American Economic Review, American Economic Association, American Economic Association, vol. 102(5), pages 1927-56, August.
  4. Douglas Almond & Bhashkar Mazumder, 2008. "Health Capital and the Prenatal Environment: The Effect of Maternal Fasting During Pregnancy," NBER Working Papers 14428, National Bureau of Economic Research, Inc.
  5. James Banks & Zoe Oldfield, 2007. "Understanding Pensions: Cognitive Function, Numerical Ability and Retirement Saving," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 28(2), pages 143-170, 06.
  6. Gordon B. Dahl & Lance Lochner, 2005. "The Impact of Family Income on Child Achievement," NBER Working Papers 11279, National Bureau of Economic Research, Inc.
  7. In Utero, 2006. "Is the 1918 Influenza Pandemic Over? Long-Term Effects of In Utero Influenza Exposure in the Post-1940 U.S. Population," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(4), pages 672-712, August.
  8. Gerard J. van den Berg & Maarten Lindeboom & France Portrait, 2006. "Economic Conditions Early in Life and Individual Mortality," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 290-302, March.
  9. Anne Case & Christina Paxson, 2009. "Early Life Health and Cognitive Function in Old Age," American Economic Review, American Economic Association, American Economic Association, vol. 99(2), pages 104-09, May.
  10. James P. Smith & John J. McArdle & Robert Willis, 2010. "Financial Decision Making and Cognition in a Family Context," Working Papers, RAND Corporation Publications Department 785, RAND Corporation Publications Department.
  11. van den Berg, Gerard J. & Doblhammer, Gabriele & Christensen, Kaare, 2009. "Exogenous determinants of early-life conditions, and mortality later in life," Social Science & Medicine, Elsevier, Elsevier, vol. 68(9), pages 1591-1598, May.
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Cited by:
  1. Beck, Audrey N. & Finch, Brian K. & Lin, Shih-Fan & Hummer, Robert A. & Masters, Ryan K., 2014. "Racial disparities in self-rated health: Trends, explanatory factors, and the changing role of socio-demographics," Social Science & Medicine, Elsevier, Elsevier, vol. 104(C), pages 163-177.

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