Mental Retirement and Non-Contributory Pensions for the Elderly Poor in Peru

KU Leuven - Center for Economic Studies Discussion Paper Series DPS14.05

35 Pages Posted: 19 Feb 2014 Last revised: 23 Sep 2014

See all articles by Rafael Novella

Rafael Novella

Inter-American Development Bank (IDB); University of Oxford - Oxford Department of International Development (ODID\Young Lives); University of Oxford - Centre on Skills, Knowledge and Organisational Performance (SKOPE); Middlesex University - Economics Department

Javier Olivera

LISER; KU Leuven, Department of Economics

Date Written: August 10, 2014

Abstract

This paper analyses the effects of retirement on cognitive abilities for the elderly poor on the basis of the “mental retirement” effect that accompanies retirement. Given the recent emergence and expansion of non-contributory pension programs to alleviate poverty in old-age across low and middle income countries, attention should be given to the potential acceleration of cognitive decline when individuals retire, i.e. when there is a decrease in their engagement of cognitive demanding activities. We use a unique and recent survey of the elderly poor in Peru (ESBAM), which includes a cognitive test and serves as the baseline for a non-contributory pension program. We find a significant negative effect of retirement on cognitive ability after controlling for a number of demographics and objective health measures and even after dealing with the potential endogeneity of retirement.

Keywords: cognitive abilities; old-age poverty; retirement; non-contributory pensions; Peru

JEL Classification: H55, J14, J24, J26

Suggested Citation

Novella, Rafael and Olivera, Javier, Mental Retirement and Non-Contributory Pensions for the Elderly Poor in Peru (August 10, 2014). KU Leuven - Center for Economic Studies Discussion Paper Series DPS14.05. Available at SSRN: https://ssrn.com/abstract=2397665 or http://dx.doi.org/10.2139/ssrn.2397665

Rafael Novella (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Stop: W0616
Washington, DC 20577
United States

University of Oxford - Oxford Department of International Development (ODID\Young Lives) ( email )

Queen Elizabeth House
3 Mansfield Road
Oxford, OX1 3TB
United Kingdom

University of Oxford - Centre on Skills, Knowledge and Organisational Performance (SKOPE) ( email )

Oxford, OX1 3UQ
United Kingdom

Middlesex University - Economics Department ( email )

The Burroughs
London, NW4 4BT
United Kingdom

Javier Olivera

LISER ( email )

11 Porte des Sciences Campus Belval
Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

HOME PAGE: http://https://sites.google.com/site/javierolive/

KU Leuven, Department of Economics ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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