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http://ssrn.com/abstract=1771258
 
 

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Retirement and Subjective Well-Being


Eric Bonsang


ROA; Netspar

Tobias J. Klein


Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER); Institute for the Study of Labor (IZA); Netspar; Tilburg Law and Economics Center (TILEC)


IZA Discussion Paper No. 5536

Abstract:     
We provide an explanation for the common finding that the effect of retirement on life satisfaction is negligible. For this we use subjective well-being measures for life and domains of life satisfaction that are available in the German Socio-Economic Panel (GSOEP) and show that the effect of voluntary retirement on satisfaction with current household income is negative, while the effect on satisfaction with leisure is positive. At the same time, the effect on health satisfaction is positive but small. Following the life domain approach we then argue that these effects offset each other for an average individual and that therefore the overall effect is negligible. Furthermore, we show that it is important to distinguish between voluntary and involuntary retirement. The effect of involuntary retirement is negative because the adverse effect on satisfaction with household income is bigger, the favorable effect on satisfaction with leisure is smaller, and the effect on satisfaction with health is not significantly different from zero. These results turn out to be robust to using different identification strategies such as fixed effects and first differences estimation, as well as instrumental variables estimation using eligibility ages and plant closures as instruments for voluntary and involuntary retirement.

Number of Pages in PDF File: 40

Keywords: retirement, subjective well-being, satisfaction measurement

JEL Classification: J26, J14

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Date posted: March 1, 2011  

Suggested Citation

Bonsang, Eric and Klein, Tobias J., Retirement and Subjective Well-Being. IZA Discussion Paper No. 5536. Available at SSRN: http://ssrn.com/abstract=1771258

Contact Information

Eric Bonsang (Contact Author)
ROA ( email )
P.O. Box 616
Maastricht, MD6200
Netherlands
Netspar ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Tobias J. Klein
Tilburg University - Department of Econometrics & Operations Research ( email )
Tilburg, 5000 LE
Netherlands
HOME PAGE: http://center.uvt.nl/staff/klein/index.html
Tilburg University - Center for Economic Research (CentER)
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
Netspar
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Tilburg Law and Economics Center (TILEC)
Warandelaan 2
Tilburg, 5000 LE
Netherlands
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