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Mental retirement and schooling

  • Bingley, Paul
  • Martinello, Alessandro

We assess the validity of differences in eligibility ages for early and old age pension benefits as instruments for estimating the effect of retirement on cognitive functioning. Because differences in eligibility ages across country and gender are correlated with differences in years of schooling, which affect cognitive functioning at old ages, they are invalid as instruments without controlling for schooling. We show by means of simulation and a replication study that unless the model incorporates schooling, the estimated effect of retirement is negatively biased. This explains a large part of the “mental retirement” effects which have recently been found.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 63 (2013)
Issue (Month): C ()
Pages: 292-298

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Handle: RePEc:eee:eecrev:v:63:y:2013:i:c:p:292-298
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  1. Mazzonna, Fabrizio & Peracchi, Franco, 2012. "Ageing, cognitive abilities and retirement," European Economic Review, Elsevier, vol. 56(4), pages 691-710.
  2. Bonsang, Eric & Adam, Stéphane & Perelman, Sergio, 2012. "Does retirement affect cognitive functioning?," Journal of Health Economics, Elsevier, vol. 31(3), pages 490-501.
  3. Anne Case & Christina Paxson & Mahnaz Islam, 2008. "Making Sense Of The Labor Market Height Premium: Evidence From The British Household Panel Survey," Working Papers 1072, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  4. Dimitrios Christelis & Tullio Jappelli & Mario Padula, 2006. "Cognitive Abilities and Portfolio Choice," CSEF Working Papers 157, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  5. James Heckman & Pedro Carneiro & Flavio Cunha, 2004. "The Technology of Skill Formation," 2004 Meeting Papers 681, Society for Economic Dynamics.
  6. Torberg Falch & Sofia Sandgren, 2006. "The effect of education on cognitive ability," Working Paper Series 7306, Department of Economics, Norwegian University of Science and Technology.
  7. 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.
  8. James Banks & Cormac O'Dea & Zoë Oldfield, 2010. "Cognitive Function, Numeracy and Retirement Saving Trajectories," Economic Journal, Royal Economic Society, vol. 120(548), pages F381-F410, November.
  9. Norma B. Coe & Hans‐Martin von Gaudecker & Maarten Lindeboom & Jürgen Maurer, 2012. "The Effect Of Retirement On Cognitive Functioning," Health Economics, John Wiley & Sons, Ltd., vol. 21(8), pages 913-927, 08.
  10. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  11. Susann Rohwedder, 2009. "Mental Retirement," Working Papers 711, RAND Corporation Publications Department.
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