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Is Retirement Depressing?: Labor Force Inactivity and Psychological Well-Being in Later Life

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Kerwin Kofi Charles
Abstract

This paper assesses how retirement - defined as permanent labor force non-participation in a man's mature years - affects psychological welfare. The raw correlation between retirement and well-being is negative. But this does not imply causation. In particular, people with idiosyncratically low well-being, or people facing transitory shocks which adversely affect well-being might disproportionately select into retirement. Discontinuous retirement incentives in the Social Security System, and changes in laws affecting mandatory retirement and Social Security benefits allows the exogenous effect of retirement on happiness to be estimated. The paper finds that the direct effect of retirement on well-being is positive once the fact that retirement and well being are simultaneously determined is accounted for.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9033.

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Date of creation: Jun 2002
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Handle: RePEc:nbr:nberwo:9033

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Find related papers by JEL classification:
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped

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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.:
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  2. Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS) 478, University of Warwick, Department of Economics. [Downloadable!]
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  3. Richard V. Burkhauser & Joseph F. Quinn, 1997. "Implementing Pro-Work Policies for Older Americans in the Twenty-First Century," Boston College Working Papers in Economics 378, Boston College Department of Economics. [Downloadable!]
  4. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
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  5. Joseph Quinn, 1996. "The Role of Bridge Jobs in the Retirement Patterns of Older Americans in the 1990s," Boston College Working Papers in Economics 324., Boston College Department of Economics. [Downloadable!]
  6. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September. [Downloadable!] (restricted)
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  7. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March. [Downloadable!] (restricted)
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  8. J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Robert Kaestner, 1996. "Are Brothers Really Better? Sibling Sex Composition and Educational Achievement Revisited," NBER Working Papers 5521, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Gary S. Fields & Olivia S. Mitchell, 1982. "Economic Determinants of the Optimal Retirement Age: An Empirical Investigation," NBER Working Papers 0876, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October. [Downloadable!] (restricted)
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  12. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May. [Downloadable!] (restricted)
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  1. Keith A. Bender & Natalia A. Jivan, 2005. "What Makes Retirees Happy?," Issues in Brief ib28, Center for Retirement Research. [Downloadable!]
  2. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," NBER Working Papers 12981, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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