Friday, 12 October 2018: 9:00 AM
This paper utilises household-level data on 17 countries from the Survey of Health, Ageing and Retirement in Europe to explore the effect of retirement of the elderly on their mental health and social connectedness. We use an instrumental variable strategy, suggested by Coe and Zamarro (2011) that takes advantage of the plausibly exogenous variation in the retirement probabilities induced by the country-level statutory and early retirement ages. Our key finding is that while retirement has no significant impact on men’s psychological well-being, it has a beneficial effect on women’s emotional health, which is a significant contribution to the literature. To elaborate more on this, exiting the workforce is predicted to decrease the likelihood that a female has suicidal thoughts by about 3 percentage points, ceteris paribus, and to improve her mental health as measured by a composite demotivation index and the Euro-D depression score. In addition to this, we also uncover a role for retirement on the social contacts of the older adults. In particular, our results suggest that workforce exit decreases the social network for men but not for women. Moreover, retirement enhances females’ contacts with parents, but has no corresponding effect for men.
Taken together, the key findings of the paper have important policy implications, as they point out the possibility that the recent trends in the European Union towards increasing the pensionable ages, as well as equalizing those ages across gender, could lead to a loss of well-being for women.
Keywords: retirement; mental health; social network
JEL classification: I10, I12, J14, J26