IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Retirement and subjective well-being

  • Bonsang, Eric
  • Klein, Tobias J.

The life cycle model predicts that individuals substitute leisure for consumption when they retire. We show that the effect of retirement on various well-being measures available in the German Socio-Economic Panel (GSOEP) are compatible with this prediction: the overall effect on life satisfaction is negligible, while satisfaction with the free time increases and satisfaction with household income decreases. The life cycle model also predicts that involuntary retirement is likely to have adverse effects because individuals would actually prefer to work in order to consume more, but are prevented from doing so. We find that indeed, involuntary retirement results in an overall negative effect that can partly be explained by a bigger drop in income satisfaction and a smaller increase in satisfaction with the free time.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0167268112001308
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 83 (2012)
Issue (Month): 3 ()
Pages: 311-329

as
in new window

Handle: RePEc:eee:jeborg:v:83:y:2012:i:3:p:311-329
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

References listed on IDEAS
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.:

as in new window
  1. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," Working Papers 97035, Stanford University, Department of Economics.
  2. Michael Hurd & Susann Rohwedder, 2005. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 242, RAND Corporation.
  3. Richard Layard & Guy Mayraz & Stephen Nickell, 2007. "The Marginal Utility of Income," CEP Discussion Papers dp0784, Centre for Economic Performance, LSE.
  4. Bernard M. S. van Praag, 2007. "Perspectives from the Happiness Literature and the Role of New Instruments for Policy Analysis," CESifo Economic Studies, CESifo, vol. 53(1), pages 42-68, March.
  5. Bernard M. S. van Praag & P. Frijters & Ada Ferrer-i-Carbonell, 2001. "The Anatomy of Subjective Well-Being," Discussion Papers of DIW Berlin 265, DIW Berlin, German Institute for Economic Research.
  6. Eric French, 2000. "The effects of health, wealth, and wages on labor supply and retirement behavior," Working Paper Series WP-00-2, Federal Reserve Bank of Chicago.
  7. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers B 03-2001, University of Bonn, ZEI - Center for European Integration Studies.
  8. Andrew E. Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2008. "Lags and leads in life satisfaction: A test of the baseline hypothesis," Post-Print halshs-00754279, HAL.
  9. Martin Salm, 2009. "Does job loss cause ill health?," Health Economics, John Wiley & Sons, Ltd., vol. 18(9), pages 1075-1089.
  10. Blau, David M., 2007. "Retirement and Consumption in a Life Cycle Model," IZA Discussion Papers 2986, Institute for the Study of Labor (IZA).
  11. Finkelstein, Amy N. & Luttmer, Erzo F. P. & Notowidigdo, Matthew J., 2009. "Approaches to Estimating the Health State Dependence of the Utility Function," Working Paper Series rwp09-002, Harvard University, John F. Kennedy School of Government.
  12. Coe, Norma B. & Zamarro, Gema, 2011. "Retirement effects on health in Europe," Journal of Health Economics, Elsevier, vol. 30(1), pages 77-86, January.
  13. 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.
  14. Steven J. Haider & Melvin Stephens, 2007. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 247-264, May.
  15. Ravallion, Martin & Lokshin, Michael, 2001. "Identifying Welfare Effects from Subjective Questions," Economica, London School of Economics and Political Science, vol. 68(271), pages 335-57, August.
  16. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  17. Easterlin, Richard A. & Sawangfa, Onnicha, 2007. "Happiness and Domain Satisfaction: Theory and Evidence," IZA Discussion Papers 2584, Institute for the Study of Labor (IZA).
  18. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  19. Hullegie, Patrick & Klein, Tobias J., 2010. "The Effect of Private Health Insurance on Medical Care Utilization and Self-Assessed Health in Germany," IZA Discussion Papers 5004, Institute for the Study of Labor (IZA).
  20. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers 015, Institute for Empirical Research in Economics - University of Zurich.
  21. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  22. Mazzonna, Fabrizio & Peracchi, Franco, 2012. "Ageing, cognitive abilities and retirement," European Economic Review, Elsevier, vol. 56(4), pages 691-710.
  23. Andrew E. Clark & Yarine Fawaz, 2009. "Valuing Jobs Via Retirement: European Evidence," National Institute Economic Review, National Institute of Economic and Social Research, vol. 209(1), pages 88-103, July.
  24. Kevin Neuman, 2008. "Quit Your Job and Get Healthier? The Effect of Retirement on Health," Journal of Labor Research, Springer, vol. 29(2), pages 177-201, June.
  25. Schwerdt, Guido, 2005. "Why does consumption fall at retirement? Evidence from Germany," Economics Letters, Elsevier, vol. 89(3), pages 300-305, December.
  26. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  27. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
  28. Bonsang Eric & Adam Stéphane & Perelman Sergio, 2010. "Does Retirement Affect Cognitive Functioning?," Research Memorandum 005, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  29. Frijters, Paul, 2000. "Do individuals try to maximize general satisfaction?," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 281-304, June.
  30. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
  31. Bender, Keith A., 2012. "An analysis of well-being in retirement: The role of pensions, health, and ‘voluntariness’ of retirement," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 424-433.
  32. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  33. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  34. Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-41, May.
  35. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 59-80, Summer.
  36. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
  37. 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.
  38. Bernard M.S. van Praag & Paul Frijters, 1999. "The measurement of welfare and well-being; the Leyden approach," School of Economics and Finance Discussion Papers and Working Papers Series 071a, School of Economics and Finance, Queensland University of Technology.
  39. Salm, M., 2009. "Does job loss cause ill health?," Other publications TiSEM 314436db-9957-4912-ba47-9, Tilburg University, School of Economics and Management.
  40. Andrew E. Clark & Yarine Fawaz, 2009. "Valuing jobs via retirement: European evidence," Working Papers halshs-00566855, HAL.
  41. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  42. Susann Rohwedder, 2009. "Mental Retirement," Working Papers 711, RAND Corporation.
  43. Lindeboom, Maarten & Portrait, France & van den Berg, Gerard, 2002. "An econometric analysis of the mental-health effects of major events in the life of older individuals," Working Paper Series 2002:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  44. John Laitner & Dan Silverman, 2005. "Estimating Life—Cycle Parameters from Consumption Behavior at Retirement”," Working Papers wp099, University of Michigan, Michigan Retirement Research Center.
  45. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  46. Easterlin, Richard A., 2006. "Life cycle happiness and its sources: Intersections of psychology, economics, and demography," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 463-482, August.
  47. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:83:y:2012:i:3:p:311-329. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.