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Retirement and Subjective Well-Being

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  • Bonsang Eric
  • Klein Tobias J.

    (METEOR)

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.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 028.

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Date of creation: 2011
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Handle: RePEc:unm:umamet:2011028

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Keywords: labour economics ;

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Cited by:
  1. Hetschko, Clemens & Knabe, Andreas & Schöb, Ronnie, 2011. "Changing identity: Retiring from unemployment," Discussion Papers 2011/11, Free University Berlin, School of Business & Economics.
  2. Clemens Hetschko & Andreas Knabe & Ronnie Schöb, 2014. "Looking Back in Anger? Retirement and Unemployment Scarring," CESifo Working Paper Series 4784, CESifo Group Munich.
  3. Sahlgren, Gabriel H., 2012. "Work ‘til You Drop: Short- and Longer-Term Health Effects of Retirement in Europe," Working Paper Series, Research Institute of Industrial Economics 928, Research Institute of Industrial Economics.
  4. Marzieh Abolhassani & Rob Alessie, 2013. "Subjective Well-Being Around Retirement," De Economist, Springer, Springer, vol. 161(3), pages 349-366, September.
  5. Caroli, Eve & Bassanini, Andrea, 2014. "Is work bad for health? The role of constraint vs choice," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/12483, Paris Dauphine University.
  6. Martin Binder & Alex Coad, 2014. "Heterogeneity in the Relationship between Unemployment and Subjective Well-Being: A Quantile Approach," Economics Working Paper Archive, Levy Economics Institute wp_808, Levy Economics Institute.
  7. Bertoni, Marco & Brunello, Giorgio, 2014. "Pappa Ante Portas: The Retired Husband Syndrome in Japan," IZA Discussion Papers 8350, Institute for the Study of Labor (IZA).

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