Does Retirement Induced Through Social Security Pension Eligibility Influence Subjective Well-Being? A Cross-Country Comparison

22 Pages Posted: 11 Jan 2014

See all articles by Arie Kapteyn

Arie Kapteyn

Dornsife Center for Economic and Social Research - University of Southern California; IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Jinkook Lee

University of Southern California - Center for Economic & Social Research; Program on Global Aging, Health & Policy, Center for Economic & Social Research; RAND Corporation

Gema Zamarro

University of Arkansas - Department of Education Reform; Center for Economic and Social Research (CESR)

Date Written: October 1, 2013

Abstract

How does retirement influence subjective well-being? Some studies suggest retirement does not affect subjective well-being or may improve it. Others suggest it adversely affects it. This paper aims at advancing our understanding of the effect of retirement on subjective well-being by (1) using longitudinal data to tease out the retirement effect from age and cohort differences; (2) using instrumental variables to address potential reverse causation of subjective well-being on retirement decisions; and (3) conducting cross-country analyses, exploiting differences in eligibility ages for retirement benefits across countries and within countries. We use panel data from the US Health and Retirement Study and the Survey of Health, Ageing, and Retirement in Europe. This allows us to use a quasi-experimental approach where variations in public pension eligibility due to country and cohort specific retirement ages help identify retirement effects. For both the U.S. and Europe we find that retirement is associated with higher levels of depression. However, when we use instrumental variables we find the opposite result. Retirement induced through Social Security pension eligibility is found to have a positive effect, reducing depression symptoms, although only marginally significant for the U.S. when considering the depression indicator. Retirement is not found to have a significant effect on life satisfaction measures for either the U.S. or Europe.

Keywords: subjective well-being, Social Security, retirement

Suggested Citation

Kapteyn, Arie and Lee, Jinkook and Zamarro, Gema, Does Retirement Induced Through Social Security Pension Eligibility Influence Subjective Well-Being? A Cross-Country Comparison (October 1, 2013). Michigan Retirement Research Center Research Paper No. 2013-301, Available at SSRN: https://ssrn.com/abstract=2376883 or http://dx.doi.org/10.2139/ssrn.2376883

Arie Kapteyn

Dornsife Center for Economic and Social Research - University of Southern California ( email )

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IZA Institute of Labor Economics

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National Bureau of Economic Research (NBER) ( email )

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Jinkook Lee

University of Southern California - Center for Economic & Social Research ( email )

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Program on Global Aging, Health & Policy, Center for Economic & Social Research ( email )

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RAND Corporation ( email )

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Gema Zamarro (Contact Author)

University of Arkansas - Department of Education Reform ( email )

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United States

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
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HOME PAGE: http://works.bepress.com/gema_zamarro/

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