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Pension Benefits, Early Retirement and Human Capital Depreciation in Late Adulthood

Plamen Nikolov and Alan Adelman

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Abstract: Historically, economists have mainly focused on human capital accumulation and considerably less so on the causes and consequences of human capital depreciation in late adulthood. Studying human capital depreciation over the life cycle has powerful economic consequences for decision-making in old age. Using data from the introduction of a retirement program in China, we examine how the introduction of a retirement program influences individual cognition. We find large negative effects of pension benefits on cognitive functioning among the elderly. We detect the most substantial impact of the program to be on delayed recall, which is a significant predictor of the onset of dementia. We show suggestive evidence that the program leads to larger negative impacts among women. We show that retirement plays a significant role in explaining cognitive decline at older ages.

Date: 2020-07, Revised 2020-08
New Economics Papers: this item is included in nep-age and nep-cna
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Handle: RePEc:arx:papers:2007.05884