Early- and later-life stimulation: How retirement shapes the effect of education on old-age cognitive abilities

Hendrik Schmitz and Matthias Westphal

No 1146, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: We study the interaction of education in adolescence and labor force participation around retirement age and its effect on cognitive abilities for individuals in Europe. Besides a direct long-run effect of education, indirect ones may arise, specifically through labor force participation. We suggest an estimator for causal mediation analysis that accommodates endogeneity and heterogeneous treatment effects and use it to identify indirect effects within the education effect. We find that education raises cognitive abilities by about 8 percent. Among the more educated, labor force participation accounts for 36 percent of the total effect, emphasizing important complementarities between education and labor force participation.

Keywords: Cognitive abilities; causal mediation analysis; marginal treatment effects; education (search for similar items in EconPapers)
JEL-codes: C31 J14 J24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:315483

DOI: 10.4419/96973329

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