Retirement and Cognitive Decline: Evidence from Global Aging Data

H. Motegi, Yoshinori Nishimura and Masato Oikawa

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: This paper analyzes the effect of retirement on cognitive function in two ways. First, we analyze this effect by using cross-country variation of pension eligibility age, a method is used in the literature. The results suggest that the country heterogeneity largely influences the estimated result, which, in turn, can lead to the opposite interpretation depending on the analyzed countries. We show that the cross-country estimation is not appropriate when analyzing the effect of retirement on cognitive function. Second, we analyze the same effect in the U.S. and other countries by controlling for individual heterogeneity and endogeneity of the retirement behavior. Prior to empirically analyzing the effect, we clarify the effect of retirement on cognitive ability by using a simple economic model with two types of endogenous cognitive investment behaviors and an endogenous retirement. Our estimates indicate that retirement has a weak or no effect on cognitive ability immediately after retirement. However, the results depend on the analyzed countries and the type of cognitive scores employed. Additionally, we investigate the heterogeneity of this effect. For example, we find that the elderly with higher BMI (Body Mass Index) and fat intake experience a negative effect of retirement on cognitive function. When considering the retirement duration, the effect of retirement on cognitive function becomes negative as the retirement duration increases.

Keywords: mental retirement; cognitive function; social security; pension eligibility age; cross-country instruments; global aging data (search for similar items in EconPapers)
JEL-codes: I10 I12 J24 J26 (search for similar items in EconPapers)
Date: 2016-07
New Economics Papers: this item is included in nep-age
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Citations: View citations in EconPapers (3)

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Working Paper: Retirement and Cognitive Decline: Evidence from Global Aging Data (2017)
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