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Wednesday, April 11, 2012

Is Early Retirement Bad for You?

Is early retirement bad for you? Evidently, it is for some. Recent research by Andreas Kuhn, Jean-Philippe Wuellrich, and Josef Zweimüller ("Fatal Attraction? Access to Early Retirement and Mortality") examined the effects of early retirement on a sample of Austrian blue-collar workers and found
that a reduction in the retirement age causes a significant increase in the risk of premature death – defined as death before age 67 – for males but not for females. The effect for males is not only statistically significant but also quantitatively important. According to our estimates, one additional year of early retirement causes an increase in the risk of premature death of 2.4 percentage points (a relative increase of about 13.4%; or 1.8 months in terms of years of life lost). In line with expectations, we find that IV estimates are considerably smaller than the simple OLS estimates, both for men and for women. This is consistent with negative health selection into retirement and underlines the importance of a proper identification strategy when estimating the causal impact of early retirement on mortality. Our results also indicate that the causal effect of early retirement on mortality for females is zero, suggesting that the negative association between retirement age and mortality in the raw data is entirely due to negative health selection. There are several reasons why male but not female blue-collar workers suffer from higher mortality (eg women may be more health-conscious and adopt less unhealthy behaviours than men; they may be more active after permanently exiting the labour market due to their higher involvement in household activities).
Whether it applies to other types of workers is still an open question. Nevertheless, be careful what you wish for. You can read more about it at the Freakonomics blog "Early Retirement: Bad for Your Health?"

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