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J Happiness Stud (2014) 15:125144 DOI 10.1007/s10902-012-9399-2
RESEARCH PAPER
Elizabeth Mokyr Horner
Published online: 1 December 2012 Springer Science+Business Media Dordrecht 2012
Abstract This study examines the relationship between retirement and subjective well-being (SWB), utilizing international data from sixteen countries in Western Europe and the US. Differences in social security regimes are exploited to estimate the retirement decision such that it is exogenous to individual-level characteristics. Although results from traditional ordinary least squares suggest an ambiguous relationship between retirement and SWB, this is due to comparatively lower SWB among those who choose retirement. The removal of selection bias reveals a large, positive effect that fades over a few years, suggesting a multi-stage adjustment to retirement. Individuals facing formal retirement at age 65 or later experience an increase in SWB that is roughly equivalent in total value to that of individuals facing earlier retirement, and both groups return to trend by age 70. This suggests that raising the formal retirement age, which is widely discussed today by policymakers, is relatively neutral with regard to SWB in the long-term.
Keywords Retirement Life satisfaction Aging International Social security
1 Background and Motivation
1.1 Introduction
Globally, our population is aging (Coggan 2011). As a result of both increased life expectancies (Kinsella and Phillips 2005) and lower birthrates (Grant et al. 2004), a growing proportion of the worlds population is over age 65. In the United States and across much of Europe, this is made salient by the Baby Boomers, who began to turn 65 in January of 2011 (Barry 2010). Current projections of Western Europe suggest that there
E. M. Horner
Goldman School of Public Policy, University of California, Berkeley, 2607 Hearst St., Berkeley, CA 94720, USA
E. M. Horner (&)
General Medical Disciplines, Stanford University School of Medicine, Stanford, CA, USA e-mail: [email protected]
Subjective Well-Being and Retirement: Analysis and Policy Recommendations
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126 E. M. Horner
will be nearly two times as many people over the age of 65 as under the age of 15 by 2050 (Cendrowicz 2010). Thus, under current retirement age regimes, the size of the retired population relative to the size of the tax-base is growing (Gruber and Wise 1999), creating mounting costs with dwindling resources. Despite between-country variation in public pension programs, the...