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Ageing, cognitive abilities and retirement

  • Fabrizio Mazzona

    (Munich Center for the Economics of Aging)

  • Franco Peracchi

    (Tor Vergata University and EIEF)

We investigate the relationship between ageing, cognitive abilities and retirement using the Survey on Health, Ageing and Retirement in Europe (SHARE), a household panel that offers the possibility of comparing several European countries using nationally representative samples of the population aged 50+. The human capital framework suggests that retirement may cause an increase in cognitive decline, since after retirement individuals lose the market incentive to invest in cognitive repair activities. Our empirical results, based on an instrumental variable strategy to deal with the potential endogeneity of retirement, confirm this key prediction. They also indicate that education plays a fundamental role in explaining heterogeneity in the level of cognitive abilities.

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Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 1015.

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Length: pages 37
Date of creation: 2010
Date of revision: Jan 2012
Handle: RePEc:eie:wpaper:1015
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