Causal Effects of Retirement on Life Satisfaction, Possible Mechanisms, and a Regression Discontinuity Approach

The health outcomes of retirement have been of major interest to researchers and policymakers working in social security policy. This study sought to examine the causal relationship between retirement and life satisfaction. A regression discontinuity design was used to address the endogeneity problem. Data were collected from the Health and Retirement Study1 to estimate the retirement effects on two measures of life satisfaction. The paper also looked for mechanisms through which getting retired affects the individuals’ life satisfaction. The results show that retirement increases the probability of being satisfied with life. Sleep behavior, the time spent on physical activity, and participation in religious gatherings are the potential mechanisms through which being retired impacts well-being and life satisfaction