Short- and Long-Run Estimates of The Local Effects of Retirement on Health

Abstract

We explore the existence of short and long term effects of retirement on health. Short term effects are estimated with a regression discontinuity design which is robust to weak instruments and where the underlying assumptions of continuity of potential outcomes are uncontroversial. To identify the long term effects we propose a parametric model which, under strong assumptions, can separate normal deterioration of health from the causal effects of retirement. We apply our framework to the British Household Panel Survey, and find that retirement has little effect on health. However, our estimates suggest that retirement opens the gate to a sedentary life with an impoverished social component and this is a channel through which retirement could indirectly affect health in the long run.

Mental Health Effects of Retirement

“…For females the wellbeing effect of retiring is high if they score high in openness or low in conscientiousness. Fé and Hollingsworth (2016) investigate the retirement effects on health and health-care utilization for UK males. Using an RDD for the short-run effects and a panel data model for the longrun effects, they find that retirement neither has short-run nor long-run health effects.…”

The complex effects of retirement on health

“…A final issue worth pointing out is that the short-term effects of retirement may be different from its longer-term effects because changes in health behavior-representing the most important causal mechanism-most likely do not have immediate, but only delayed effects [8], [9]. For example, if retirement triggers bad health behavior such as more intense smoking and drinking or less exercising, then this change in behavior will only show up some considerable time after retirement.…”

Pension Eligibility Rules and the Local Causal Effect of Retirement on Cognitive Functioning

“…As noted in Rohwedder and Willis (2010) individuals tend to invest the additional leisure time in a sedentary lifestyle. Fé and Hollingsworth (2016) found that retirees increase the amount of time spent sleeping and in other passive activities ‐such as watching television‐ which do not involve social interactions or time outside home. This life style is unlikely to promote effortful encoding or retrieval of information and therefore there is a risk that retirement contributes to accelerating the decline in memory and overall cognitive functioning.…”

“…In particular, pension eligibility rules (or ‘eligibility’ hereafter) have been routinely used (e.g. Aguiar & Hurst, 2005; Battistin et al., 2009; Bonsang et al., 2012; Bound & Waidmann, 2007; Charles, 2004; Coe & Lindeboom, 2008; Fé & Hollingsworth, 2016; Mazzonna & Peracchi, 2016; Neuman, 2008; Rohwedder & Willis, 2010). Pension eligibility rules are exogenously determined by central governments and they are responsible for a significant number of retirement decisions across different nations every year (e.g.…”