The Effect of Retirement on Cognitive Functioning

19 Pages Posted: 24 Mar 2010

See all articles by Norma Coe

Norma Coe

University of Pennsylvania - Perelman School of Medicine

Hans-Martin von Gaudecker

University of Bonn - Economic Science Area; Netspar; Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Maarten Lindeboom

Vrije Universiteit Amsterdam; Tinbergen Institute Amsterdam; IZA Institute of Labor Economics

Juergen Maurer

affiliation not provided to SSRN

Date Written: October 27, 2009

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. Decelerating its decline among the elderly is one of the main challenges for ageing societies. In the light of policies aimed at postponing retirement ages, an important question is whether retirement has an influence on the descend rate. Among the life style and psychosocial risk factors, intellectual stimulation has often been mentioned as a key factor in maintaining high levels of cognitive functioning. We use data from the HRS to estimate a model for the change in cognitive functioning. As retirement and cognitive functioning may be endogenously related, we use unexpected early retirement window o ers to instrument for retirement behavior. These offers are legally required to be unrelated to the baseline health of the individual, and are significant predictors of retirement. While the simple OLS estimates show a negative relation between retirement and the rate of decline in various measures of cognitive functioning, instrumental variables estimates suggest that this may not be a causal effect. In particular, we do not find a clear relationship for white-collar workers and a positive relation for blue-collar workers.

Suggested Citation

Coe, Norma and von Gaudecker, Hans-Martin and Lindeboom, Maarten and Maurer, Juergen, The Effect of Retirement on Cognitive Functioning (October 27, 2009). Netspar Discussion Paper No. 10/2009-044, Available at SSRN: https://ssrn.com/abstract=1572400 or http://dx.doi.org/10.2139/ssrn.1572400

Norma Coe

University of Pennsylvania - Perelman School of Medicine ( email )

423 Guardian Drive
Philadelphia, PA 19104
United States

Hans-Martin Von Gaudecker (Contact Author)

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

Maarten Lindeboom

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6033 (Phone)
+31 20 444 6020 (Fax)

Tinbergen Institute Amsterdam

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Juergen Maurer

affiliation not provided to SSRN ( email )