Is Retirement Depressing?: Labor Force Inactivity and Psychological Well-Being in Later Life

Kerwin Kofi Charles

NBER Working Paper No. 9033
Issued in June 2002
NBER Program(s):   LS

This paper assesses how retirement - defined as permanent labor force non-participation in a man's mature years - affects psychological welfare. The raw correlation between retirement and well-being is negative. But this does not imply causation. In particular, people with idiosyncratically low well-being, or people facing transitory shocks which adversely affect well-being might disproportionately select into retirement. Discontinuous retirement incentives in the Social Security System, and changes in laws affecting mandatory retirement and Social Security benefits allows the exogenous effect of retirement on happiness to be estimated. The paper finds that the direct effect of retirement on well-being is positive once the fact that retirement and well being are simultaneously determined is accounted for.

(139 K)

Published: Charles, Kerwin Kofi. “Is Retirement Depressing?: Labor Force Inactivity and Psychological Well Being in Later Life." Research in Labor Economics 23 (2004): 269-299.

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