Is retirement good for men’s health? Evidence using a change in the retirement age in Israel

Abstract

This study examines the effect of employment on elderly men’s health. A typical OLS analysis yields a positive relationship between employment and health for individuals in their sixties. Causality, however, is difficult to infer because healthier individuals are more capable of working than others. To overcome this endogeneity problem, this paper exploits the increase in the full retirement age for men in Israel from sixty-five to sixty-seven in 2004. After this change, the employment rate of men in this age bracket jumped significantly compared to the last cohort that was able to retire at sixty-five. Using the new retirement law as an exogenous source of variation in the employment status of elderly men, a significant causal relationship in the opposite direction of the correlation is found: employment at older ages impairs health. These findings are found across a broad array of datasets and health outcomes. The results are significantly stronger among less-educated workers, suggesting that employment in physically demanding occupations is more detrimental to health. Placebo analyses using the years preceding the new retirement regime and other health measures unrelated to employment (e.g., dentist visits) reinforce a causal interpretation of my main findings.