Does Retirement Affect Cognitive Functioning?

Abstract

This paper analyzes the effect of retirement on cognitive functioning using two large scale surveys. On the one hand the HRS, a longitudinal survey among individuals aged 50+ living in the United States, allows us to control for individual heterogeneity and endogeneity of the retirement decision by using the eligibility age for Social Security as an instrument. On the other hand, a comparable international European survey, SHARE, allows us to identify the causal effect of retirement on cognitive functioning by using the cross-country differences in the age-pattern of retirement. The results highlight in both cases a significant negative, and quantitatively comparable, effect of retirement on cognitive functioning. Our results suggest that promoting labor force participation of older workers is not only desirable to insure the viability of retirement schemes, but it could also delay cognitive decline, and thus the occurrence of associated impairments at older age.labour economics ;