The effect on mental health of retiring during the economic crisis

This paper investigates the causal impact of retirement on late life depression, a growing concern for public health as major depressive disorders are the second leading cause of disability. We shed light on the role of economic conditions in shaping the effect of retirement on mental health by exploiting the time and regional variation in the severity of the economic crisis across ten European countries over the 2004-2013 period. We use data from four waves of the Survey of Health, Ageing and Retirement in Europe (SHARE) and address the potential endogeneity of retirement decision to mental health by applying a fixed-effect instrumental variable approach. Results indicate that retirement improves mental health of men, but not of women. This effect is stronger for those men working in regions that are severely hit by the economic crisis and in blue-collar jobs. These findings may be explained by the worsening of working conditions and the rise in job insecurity stemming from the economic downturn: In these circumstances, the exit from the labor force is perceived as a relief.