Structural demographic changes in recent decades have increased the proportion of an individual?s life spent in retirement, challenging the financial sustainability of Social Security and other public programs. In order to cope with these problems, many governments have implemented policies aimed at increasing the average retirement age of the population. However, the implications of later retirement for health outcomes, particularly cognitive functioning, are still not well understood. Studying the effects of retirement on cognition requires a unified framework that recognizes these effects may be different for individuals with different work experiences and job demands and that, by allowing for different sources of individual heterogeneity, is able to reconcile previous mixed evidence on the signs of these effects. In this study we examine the effects of retirement on cognition in the United States by developing and estimating a life-cycle model in which workers with different occupational job demands optimally choose consumption, when to retire, and cognitive repair investments. The model will be estimated with longitudinal data from the Health and Retirement Study and the O*NET skills survey, and it will be used to assess the causal effect of retirement on cognitive decline for workers with different occupations by conducting counterfactual policy experiments. Our approach provides a unified framework to estimate heterogeneous retirement effects on cognition, and to study how occupational job demands moderate this relationship, as well as the mediating role of cognitive repair investments.
Understanding the effects of retirement on cognitive functioning is fundamental to designing effective policies that maximize the long-term physical and mental health of the elderly. Yet, to date there is little agreement among researchers about whether later retirement is beneficial or harmful for cognition. In this study, we examine the heterogeneous effects of retirement on cognition estimating a theoretically-based life-cycle model of consumption, retirement and cognitive repair choices, that enables the study of heterogeneous retirement effects by different occupational job demands, as well as the mediating role of cognitive repair investments.
