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Retirement and Subjective Well-Being

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  • Bonsang Eric
  • Klein Tobias J.

    (ROA rm)

Abstract

We provide an explanation for the common finding that the effect of retirement onlife satisfaction is negligible. For this we use subjective well-being measures for lifeand 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 currenthousehold 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 thelife domain approach we then argue that these effects offset each other for an averageindividual and that therefore the overall effect is negligible. Furthermore, we showthat it is important to distinguish between voluntary and involuntary retirement. Theeffect of involuntary retirement is negative because the adverse effect on satisfactionwith household income is bigger, the favorable effect on satisfaction with leisure issmaller, and the effect on satisfaction with health is not significantly different fromzero. These results turn out to be robust to using different identification strategiessuch as fixed effects and first differences estimation, as well as instrumental variablesestimation using eligibility ages and plant closures as instruments for voluntary andinvoluntary retirement.

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Bibliographic Info

Paper provided by Maastricht University, Research Centre for Education and the Labour Market (ROA) in its series ROA Research Memorandum with number 005.

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Date of creation: 2011
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Handle: RePEc:unm:umaror:2011005

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Keywords: Economics ;

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Cited by:
  1. Bassanini, Andrea & Caroli, Eve, 2014. "Is Work Bad for Health? The Role of Constraint vs Choice," IZA Discussion Papers 7891, Institute for the Study of Labor (IZA).
  2. Hetschko, Clemens & Knabe, Andreas & Schöb, Ronnie, 2011. "Changing identity: Retiring from unemployment," Discussion Papers 2011/11, Free University Berlin, School of Business & Economics.
  3. Clemens Hetschko & Andreas Knabe & Ronnie Schöb, 2014. "Looking Back in Anger?: Retirement and Unemployment Scarring," SOEPpapers on Multidisciplinary Panel Data Research 652, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Marzieh Abolhassani & Rob Alessie, 2013. "Subjective Well-Being Around Retirement," De Economist, Springer, vol. 161(3), pages 349-366, September.
  5. 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.
  6. 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.

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