Retirement and Unexpected Health Shocks

39 Pages Posted: 8 Jan 2018

See all articles by Benedicte Apouey

Benedicte Apouey

Paris School of Economics (PSE); CNRS

Cahit Guven

Deakin University - School of Accounting, Economics and Finance

Claudia Senik

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA); Universite Paris IV Sorbonne; IZA Institute of Labor Economics

Abstract

Do people form correct expectations about the impact of retirement on their health? This paper looks at unexpected health shocks that hit people after they retire. Using data from the Household, Income and Labour Dynamics in Australia survey (waves 2001-2014), we construct measures of unexpected health shocks for each year, using information on respondents' views about the expected and past evolution of their health status. By definition, unexpected health shocks are immune to the problem of reverse causality (running from health condition to retirement). Our findings indicate that retirement increases the likelihood of positive health shocks and decreases the probability of negative shocks for men, with no clear results for women. These shocks are mirrored by variations in life satisfaction of the same nature (e.g. increased life satisfaction in case of unexpected positive health shocks). Other indicators of mental and physical health taken from the SF-36 vary in the same way, i.e. improve unexpectedly after retirement for men. These findings suggest that, at least in the case of men, people's desire to retire may not be based on perfectly correct expectations about the impact of this move, but is aligned with its actual consequence: retirement exerts a positive causal impact on health.

Keywords: life satisfaction, health shocks, Australia, HILDA, health, retirement

JEL Classification: I12, I31, J26

Suggested Citation

Apouey, Benedicte and Apouey, Benedicte and Guven, Cahit and Senik, Claudia, Retirement and Unexpected Health Shocks. Available at SSRN: https://ssrn.com/abstract=3097324 or http://dx.doi.org/10.2139/ssrn.3097324

Benedicte Apouey (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

CNRS ( email )

France

Cahit Guven

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Claudia Senik

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA) ( email )

ENS, 48, bd Jourdan
75014 Paris
France
+33 1 4313 6312 (Phone)

Universite Paris IV Sorbonne

Department of Economics
75230 Paris Cedex 05
France
01 43 13 63 12 (Phone)

IZA Institute of Labor Economics

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

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