Economic Conditions at the Time of Birth and Cognitive Abilities Late in Life: Evidence from Eleven European Countries

48 Pages Posted: 4 Sep 2011

See all articles by Gabriele Doblhammer-Reiter

Gabriele Doblhammer-Reiter

University of Rostock

Gerard J. van den Berg

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Thomas Fritze

affiliation not provided to SSRN

Abstract

With ageing populations and a stronger reliance on individual financial decision-making concerning asset portfolios, retirement schemes, pensions and insurances, it becomes increasingly important to understand the determinants of cognitive ability among the elderly. Macro-economic recession and boom periods provide a unique opportunity to study the effect of changes in the early life economic environment on late life cognition. In European countries, about three to four economic recession and boom periods can be identified between 1900 and 1945. The timing of these periods differs between the countries, which makes a cross-country study design particularly powerful, as it is insensitive to country-specific confounding factors. We use data from the Survey of Health, Aging and Retirement in Europe (SHARE) among elderly individuals. This survey is homogeneous across countries. We use almost 20,000 respondents from 11 countries. We examine several domains of cognitive functioning at ages 60+ and link them to the macro-economic deviations in the year of birth, controlling for current demographic, socioeconomic and health status. We find that being born during a recession or boom period significantly influences cognitive functioning late in life in various domains. The effects are particularly pronounced among the less educated. Boom periods positively influence numeracy and verbal fluency as well as the score on the omnibus cognitive indicator. The results are robust; controlling for current characteristics does not change effect sizes and significance. We conclude that cognitive functioning late in life is influenced by economic conditions in the year of birth, and we discuss possible causal pathways.

Keywords: dementia, long-run effects, health, developmental origins, economic business cycle, cognition, numeracy, memory, decision-making

JEL Classification: I12, I18, J14, N14, N34, J26

Suggested Citation

Doblhammer-Reiter, Gabriele and van den Berg, Gerard J. and Fritze, Thomas, Economic Conditions at the Time of Birth and Cognitive Abilities Late in Life: Evidence from Eleven European Countries. IZA Discussion Paper No. 5940. Available at SSRN: https://ssrn.com/abstract=1922012

Gabriele Doblhammer-Reiter (Contact Author)

University of Rostock ( email )

Ulmenstr. 69
Rostock, 18057
Germany

Gerard J. Van den Berg

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6132 (Phone)
+32 20 444 6020 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Thomas Fritze

affiliation not provided to SSRN ( email )

No Address Available

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