The dynamic effects of retirement on well-being

Dusanee Kesavayuth, Robert Rosenman and Vasileios Zikos

Applied Economics, 2020, vol. 52, issue 54, 5921-5935

Abstract: In this paper we examine whether and to what extent people anticipate their retirement and adapt to it over time. For identification we use an instrumental variable approach that exploits the eligibility ages for state pension as a source of exogenous variation in retirement status. We show that retirement increases satisfaction with the amount of leisure time up to two years prior to retiring. Upon retirement, individuals reported higher satisfaction with their income and leisure. For leisure the well-being boost did not dissipate over time, but for income satisfaction adaptation was complete. These findings provide new empirical evidence on the causal link between retirement and well-being and suggest that such link may be better understood as a three-stage process occurring before, during and after retirement.

Date: 2020
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DOI: 10.1080/00036846.2020.1781770

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