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Well-being in Old Age


Wed 26. 8.  11:00 - 12:30
room FA 204

The effect of retirement on subjective well-being in Hungary


Radó, Márta
Corvinus University of Budapest, Hungary

*1. Background* The focus of this paper is the impact of retirement on subjective well-being. The change in subjective well-being after retirement calls for empirical studies, since retirement has contradictory effects on different life domains. For example, retirement means drop in the income and health, but it also provides more leisure time. At the time of retirement people have aggregating experience from the previous stages, which provides opportunities and limitations for the agent. Therefore, besides the overall impact of retirement on well-being, this paper also focuses on how voluntarism of retirement decisions effects this transition. The observation of this dimension is especially important in Hungary, since it has been shown that Hungary has one of the highest involuntary retirement rates among the OECD countries. (Dorn 2007; Kohli 2014) There are several theories that provide explanation of how well-being changes after retirement. According to the role theory, employment has the main importance in the formation of identity. Therefore, after retirement we can assume that well-being declines, since the individual loses his or her important role. In contrast, advocates of the role-strain theory argue that retirement relieves individuals from expectations, which leads to an increase of their well-being. And also we need to mention the continuity theory, which highlights the fact that individuals try to maintain their standard of living, their self-esteem and their values, therefore we can assume that their well-being is not affected by retirement that much. (Kim and Moen 2002) International research is inconsistent about the effect of retirement on well-being. There is some research which has found positive relationship. (e.g. Charles 2004, Gall et al 1997) Others suggest that the well-being diminishes right after retirement (e.g. Bosse et al 2004). And finally others have shown that indeed retirement has no effect on well-being (e.g. Bonsang and Klein 2001). *2. Data and Methods* This research is based on the dataset of the Turning Points of Life Course program (Hungarian GGS), which was a longitudinal research (between 2001 and 2004) done by the Hungarian Central Statistical Office. The change in subjective well-being is calculated by the deviation between the life satisfaction in the first and second wave. It is known from the second wave who retired between 2001 and 2004 and whether this retirement was voluntary or not. . All of the models found matches by the help of the following predictor variables: sex, have a partner or not, subjective health status, education, age, residence and income. The aim of this paper is to draw causal conclusions. This is obtained by combining matching method by longitudinal data analysis. Matching method is a state-of-art methodological innovation, which enables researchers to draw causal conclusions without an access to experimental design. It tries to overcome the fact that the treated and the control group is different. So this method is especially useful in the field of demography, which predominantly deals with observational data. In this paper matching methid is combined by longitudinal data analysis. (Ho et al. 2007) *3. Findings* 3.1. The effect of retirement on well-being Firstly the effect of retirement on well-being was measured by simply comparing the mean of those who retired between 2001 and 2004 and those who were non-retired in 2004. On avarge those who retired between 2001 and 2004 has 0.76 points, whereas non-retired people gained 0.29 points. ANOVA shows that this difference are significant (P-value 0.03). So those who retired between 2001 and 2004 experienced significantly bigger increase in their subjective well-being between 2001 and 2004 than non-retired people. So at first sight, one could conclude that those who retired also achieved a higher level of subjective well-being than those who did not by two-dimensional analysis. After this matching method and difference in differnce was used in order to draw causal conlusion. By using matching and difference in difference methode we can see that this correlation can be explained by the particular socioeconomic status of pensioners before retirement. According to this regression model in the matched dataset, retirement has no longer significant effect on subjective well-being. This finding supports the continuity theory (and it is contesting the role theory and the role-strain theory), which assumes that individuals’ well-being is not affected by retirement , since they try to maintain their standard of living, their self-esteem and their values during their entire life course. 3.2. The effect of voluntarism on well-being First of all, a simple mean difference in subjective well-being is observed. The voluntary retired had significantly higher subjective well-being before and after retirement than the involuntary had. Moreover, the voluntary retired experienced increase (0.39) in their subjective well-being, while involuntary retirees’ subjective well-being declined (-0.09) right after retirement. The difference between the changes in subjective well-being of these two groups is significant. (P-value 0.04). After the matching, the voluntarism of retirement still has significant effect on subjective well-being change. This means that voluntary and involuntary retired people experienced different changes in subjective well-being even if we take into account that the compositions of these two groups are different. By applying matching method, further steps have been taken in order to draw causal conclusion between voluntarism and subjective well-being. The very high involuntary rate is not only alarming, because of the waste of human capital, which deepens the financial problems of the pension system. But also, as this paper has demonstrated, it is also an important matter because involuntary retirement leads to a break in the individual life course, which raises equity problems. *Bibliography:* Bonsang E. and Klein T. J. (2011) Retirement and Subjective Well-Being, Netspar Discussion Paper, 04/2010-012, Internet access: http://arno.uvt.nl/show.cgi?fid=113983 (download: 10.03.2014) Bossé, Raymond; Aldwin, Carolyn M.; Levenson, Michael R. és Ekerdt, David J.(1987) Mental health differences among retirees and workers: Findings from the normative aging study, Psychology and Aging, Vol 2(4) Charles, K.K (2004) Is retirement depressing?: Labor force inactivity and psychological well-being in later life,‖ Research in Labor Economics, 23, 269-299. Dorn, D. (2007) ’Voluntary’ and ’involuntary’ Early Retirement: An International Analysis, ISA, Discussion Paper No. 2714, Internet access: http://ftp.iza.org/dp2714.pdf (download: 10.03.2014) Gall, T. L., Evans, D. R. és Howard, J. (1997). Retirement adjustment process: Changes in the well-being of male retirees across time. Journal of Gerontology: Psychological Sciences, 52B Ho et al. (2007) “Matching as Nonparametric Preprocessing for Reducing Model Dependence in Parametric Causal Inference.” Political Analysis 15. http://gking.harvard.edu/files/matchp.pdf Kim, J. E. és Moen, P. (2002) Retirement transitions, gender, and psychological well-being: A life-course, ecological model. Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 57 Kohli M. (2007) The Institutionalization of the Life Course: Looking Back to Look Ahead, Research in Human development, 4(3–4), 253–271, Internet access: