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The Effect Of Retirement On Cognitive Functioning

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  • Norma B. Coe
  • Hans‐Martin von Gaudecker
  • Maarten Lindeboom
  • Jürgen Maurer

Abstract

Cognitive impairment has emerged as a major driver of disability in old age, with profound effects on individual well‐being and decision making at older ages. In the light of policies aimed at postponing retirement ages, an important question is whether continued labour supply helps to maintain high levels of cognition at older ages. We use data of older men from the US Health and Retirement Study to estimate the effect of continued labour market participation at older ages on later‐life cognition. As retirement itself is likely to depend on cognitive functioning and may thus be endogenous, we use offers of early retirement windows as instruments for retirement in econometric models for later‐life cognitive functioning. These offers of early retirement are legally required to be nondiscriminatory and thus, inter alia, unrelated to cognitive functioning. At the same time, these offers of early retirement options are significant predictors of retirement. Although the simple ordinary least squares estimates show a negative relationship between retirement duration and various measures of cognitive functioning, instrumental variable estimates suggest that these associations may not be causal effects. Specifically, we find no clear relationship between retirement duration and later‐life cognition for white‐collar workers and, if anything, a positive relationship for blue‐collar workers. Copyright © 2011 John Wiley & Sons, Ltd.

Suggested Citation

  • 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, August.
  • Handle: RePEc:wly:hlthec:v:21:y:2012:i:8:p:913-927
    DOI: 10.1002/hec.1771
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    References listed on IDEAS

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    1. Coe, Norma B. & Lindeboom, Maarten, 2008. "Does Retirement Kill You? Evidence from Early Retirement Windows," IZA Discussion Papers 3817, Institute of Labor Economics (IZA).
    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. Jérôme Adda & James Banks & Hans-Martin von Gaudecker, 2009. "The Impact of Income Shocks on Health: Evidence from Cohort Data," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1361-1399, December.
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    9. John Bound & Timothy Waidmann, 2007. "Estimating the Health Effects of Retirements," Working Papers wp168, University of Michigan, Michigan Retirement Research Center.
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