Does retirement affect cognitive functioning?

This paper analyzes the effect of retirement on cognitive functioning using two large scale surveys. First, a longitudinal survey among older Americans allows controlling for individual heterogeneity and endogeneity of the retirement decision. Second, a cross-national European survey allows identifying the causal effect of retirement on cognition by using the cross-country differences in the age-pattern of retirement. The results highlight in both cases a significant negative and quantitatively comparable effect. It suggests that promoting labor force participation of older workers could delay cognitive decline, and thus the occurrence of associated impairments at older age.