Short‐term effect of retirement on health: Evidence from nonparametric fuzzy regression discontinuity design

Abstract

AbstractWe estimate the short‐term effect of retirement on health in the US using the Health and Retirement Study survey. We use the nonparametric fuzzy regression discontinuity design to avoid assuming any functional form on the age‐health profile and minimize potential bias in identifying the causal effect of retirement on health status in the short term. Estimates indicate an 8% decline in the cognitive functioning score of retirees and a 28% increase in the CESD depression scale. The likelihood of being in good health status declined by 16%. The transition from working to retirement has more significant negative impacts on males than females. In addition, retirement has more considerable adverse effects on less‐educated individuals compared to high‐educated individuals. The short‐term effects of retirement on health are consistent and robust across different bandwidths, weighting kernel functions, and age‐profile specifications. Moreover, the Treatment Effect Derivative test results highly support the external validity of the nonparametric estimates of the retirement effect on health.