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Is Retirement Depressing?: Labor Force Inactivity and Psychological Well-Being in Later Life

  • Kerwin Kofi Charles
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    This paper assesses how retirement - defined as permanent labor force non-participation in a man's mature years - affects psychological welfare. The raw correlation between retirement and well-being is negative. But this does not imply causation. In particular, people with idiosyncratically low well-being, or people facing transitory shocks which adversely affect well-being might disproportionately select into retirement. Discontinuous retirement incentives in the Social Security System, and changes in laws affecting mandatory retirement and Social Security benefits allows the exogenous effect of retirement on happiness to be estimated. The paper finds that the direct effect of retirement on well-being is positive once the fact that retirement and well being are simultaneously determined is accounted for.

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    File URL: http://www.nber.org/papers/w9033.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9033.

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    Date of creation: Jun 2002
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    Publication status: published as Charles, Kerwin Kofi. “Is Retirement Depressing?: Labor Force Inactivity and Psychological Well Being in Later Life." Research in Labor Economics 23 (2004): 269-299.
    Handle: RePEc:nbr:nberwo:9033
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    1. Olivia S. Mitchell, 1987. "Worker Knowledge of Pension Provisions," NBER Working Papers 2414, National Bureau of Economic Research, Inc.
    2. Gary S. Fields & Olivia S. Mitchell, 1984. "Economic Determinants of the Optimal Retirement Age: An Empirical Investigation," Journal of Human Resources, University of Wisconsin Press, vol. 19(2), pages 245-262.
    3. Richard V. Burkhauser & Joseph F. Quinn, 1997. "Implementing Pro-Work Policies for Older Americans in the Twenty-First Century," Boston College Working Papers in Economics 378, Boston College Department of Economics.
    4. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
    5. Oswald, Andrew J, 1997. "Happiness and Economic Performance," Economic Journal, Royal Economic Society, vol. 107(445), pages 1815-31, November.
    6. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
    7. Joseph Quinn, 1996. "The Role of Bridge Jobs in the Retirement Patterns of Older Americans in the 1990s," Boston College Working Papers in Economics 324., Boston College Department of Economics.
    8. Robert Kaestner, 1997. "Are Brothers Really Better? Sibling Sex Composition and Educational Achievement Revisited," Journal of Human Resources, University of Wisconsin Press, vol. 32(2), pages 250-284.
    9. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
    10. 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.
    11. Joseph F. Quinn & Olivia S. Mitchell, . "Social Security on the Table," Pension Research Council Working Papers 96-3, Wharton School Pension Research Council, University of Pennsylvania.
    12. Joseph F. Quinn & Richard V. Burkhauser & Daniel A. Myers, 1990. "Passing the Torch: The Influence of Economic Incentives on Work and Retirement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number pt, June.
    13. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
    14. J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc.
    15. Christopher J. Ruhm, 1995. "Secular Changes in the Work and Retirement Patterns of Older Men," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 362-385.
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