We quantify the impact of old-age retirement on health using longitudinal Finnish register data for the period 2000–2012. The data allows for a strict isolation of the effects of transition from work to retirement for both mental and physical health indicators. We use the lowest statutory eligibility age for full old-age pensions, 63 years, as an instrument in FE-IV estimation to ensure causal inference. We find that (1) retirement at age 63 moderately decreases the use of antidepressants, especially for women. The effect is sharp, while it is somewhat reversed in the later years; (2) the beneficial effects of retirement on the cardiovascular and musculoskeletal conditions are smaller and more diffused; (3) for occupational classes, our results show a reduction in antidepressant use for women in almost all occupations, whereas for men it is significant for manual workers and farmers; (4) we find stronger declines in the anti-depressant use among men and women who retire from low- and mid-income work, as well as more robust decrease in the risk of cardiovascular diseases for high-income and non-single; and (5) our test of external validity shows that the beneficial effects in antidepressant use can be extended to apply to most Finns retiring at ages 62–64.
The Journal of the Economics of Ageing, Volume 17, October 2020, 100257.