Abstract
AbstractIn response to the rising financial pressure on old-age pension systems in industrialised economies, many European countries plan to increase the eligibility age for retirement pensions. We used data from Sweden to examine whether (and if so, how) retirement after age 65 – the eligibility age for basic pension – compared to retiring earlier affects older adults’ (between ages 70 and 85) cognitive functioning. Using a propensity score matching (PSM) approach, we addressed the selection bias potentially introduced by non-random selection into either early or late retirement. We also examined average and heterogeneous treatment effects (HTEs). HTEs were evaluated for different levels of cognitive stimulation from occupational activities before retirement and from leisure activities after retirement. We drew from a rich longitudinal data-set linking two nationally representative Swedish surveys with a register data-set and found that, on average, individuals who retire after age 65 do not have a higher level of cognitive functioning than those who retire earlier. Similarly, we did not observe HTEs from occupational activities. With respect to leisure activities, we found no systematic effects on cognitive functioning among those working beyond age 65. We conclude that, in general, retirement age does not seem to affect cognitive functioning in old age. Yet, the rising retirement age may put substantial pressure on individuals who suffer from poor health at the end of their occupational career, potentially exacerbating social- and health-related inequalities among older people.
Highlights
In light of the rising life expectancy and associated financial pressure on old-age pension systems in industrialised economies, many Organisation for Economic Co-operation and Development (OECD) countries have increased or plan to increase the eligibility age for retirement pensions (OECD, 2013: 55)
The power analysis for the average treatment effect on the treated (ATT) provided us with a high level of statistical power, which suggests that the chances of rejecting the null hypothesis by error are low
Turning to the heterogeneous treatment effects (HTEs) analysis, we first present the findings concerning whether occupational activities before retirement affect cognitive functioning in old age
Summary
In light of the rising life expectancy and associated financial pressure on old-age pension systems in industrialised economies, many Organisation for Economic Co-operation and Development (OECD) countries have increased or plan to increase the eligibility age for retirement pensions (OECD, 2013: 55). There exist two hypotheses about the potential effects of working life extension on cognitive functioning in old age: on the one hand, the ‘wear and tear’ hypothesis claims that engaging in stressful activities, such as working under time pressure, can have harmful effects (Case and Deaton, 2005: 202; Reeuwijk et al, 2013: 6). This perspective suggests that later retirement leads to worse health outcomes than earlier retirement. Later retirement leads to better health outcomes than earlier retirement
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