Effects of retirement on cognitive functioning: Evidence from biomedical and administrative insurance claims data

We study the effects of retirement on cognitive functioning among women aged 63 to 67 by exploiting a German retirement reform that raised the early retirement age for women born after 1951 by three years, from 60 to 63. Our indicators of cognitive functioning are experimental measures (word recall, semantic fluency, and the Stroop test) from a large biomedical data set, as well as the diagnosis of cognitive disorders from administrative health insurance claims. We find reductions of around 12% of a standard deviation per year in retirement for measures of fluid intelligence and of an insignificant 6% for crystallized intelligence. The diagnosis of cognitive disorders remains unaffected.