Does (Re-)Entering the Labor Market at Advanced Ages Protect Against Cognitive Decline? A Panel-Matching Difference-in-Differences Approach

Abstract

While prolonged labor market participation becomes increasingly important in ageing societies, evidence of the impacts of entering or exiting work beyond age 65 on cognitive functioning is scarce. We estimate these effects using panel-matching difference-in-differences with populationrepresentative panel datasets from South Korea and the United States. We compare countries and across socioeconomic characteristics. We find general positive effects of entering the labor market in South Korea, while only individuals with high assets in the US benefit from entering the labor market. Exiting the labor market does not result in changes in cognitive functioning in Korea but is followed by a cognitive decline in individuals with low assets in the US. Findings suggest that the benefits and disincentives from late-life labor status transitions on cognitive functioning vary between South Korea and the US and across socioeconomic groups.

Keywords: older-age labor market, cognitive function, Difference-in-Differences, South Korea