Understanding the effect of retirement on health: Mechanisms and heterogeneity

Abstract

This paper investigates the mechanisms behind the health effects of retirement. Using a Regression Discontinuity Design to exploit financial incentives in the German pension system for identification, I find that retirement improves subjective health status and mental health, while also reducing outpatient care utilization. I explore a wide range of health behaviors, time use, and effect heterogeneity as potential mechanisms. Relief from work-related stress and strain, increased sleep duration as well as more frequent physical exercise seem to be key mechanisms through which retirement affects health.