From Binghamton University
BINGHAMTON, N.Y.
– October 29, 2019 -- Early retirement can accelerate cognitive decline among
the elderly, according to research conducted by faculty at Binghamton
University, State University of New York.
Plamen Nikolov, assistant professor of
economics, and Alan Adelman, a doctoral student in economics, examined China's
New Rural Pension Scheme (NRPS) and the Chinese Health and Retirement
Longitudinal Survey (CHARLS) to determine the effects of pension benefits on
individual cognition of those ages 60 or above. CHARLS, a nationally
representative survey of people ages 45 and above within the Chinese
population, is a sister survey of the U.S. Health and Retirement Survey and
directly tests cognition with a focus on episodic memory and components of
intact mental status.
With a higher life expectancy and
decline in fertility in developing countries, the elderly population has become
the largest demographic source in Asia and Latin America, generating an urgent
need for new, sustainable pension systems. However, research suggests that
these retirement plans can be detrimental, as retirement plays a significant
role in explaining cognitive decline at older ages.
"Because of this large demographic
boom, China introduced a formal pension program (called NRPS) in rural parts of
the country. The program was introduced on the basis of an economy's needs and
capacity, in particular to alleviate poverty in old age," said Nikolov.
"In rural parts of the country, traditional family-based care for the
elderly had largely broken down, without adequate formal mechanisms to take its
place. For the elderly, inadequate transfers from either informal family and
community transfers could severely reduce their ability to cope with illness or
poor nutrition."
The researchers discovered that there
were significant negative effects of pension benefits on cognition functioning
among the elderly. The largest indicator of cognitive decline was delayed
recall, a measure that is widely implicated in neurobiological research as an
important predictor of dementia. The pension program had more negative effects
among females, and Nikolov said the results support the mental retirement
hypothesis that decreased mental activity results in the worsening of cognitive
skills.
"Individuals in the areas that
implement the NRPS score considerably lower than individuals who live in areas
that do not offer the NRPS program," Nikolov said. "Over the almost
10 years since its implementation, the program led to a decline in cognitive
performance by as high as almost a fifth of a standard deviation on the memory
measures we examine."
Surprisingly, the estimated program
impacts were similar to the negative findings in higher income countries such
as America, England and the European Union, which Nikolov said demonstrates the
global issues of retirement.
"We were surprised to find that
pension benefits and retirement actually resulted in reduced cognitive
performance. In a different study we found a very robust finding that the
introduction of pension benefits and retirement led to positive health benefits
via improvements in sleep and the reduction of alcohol consumption and
smoking," he said. "The fact that retirement led to reduced cognitive
performance in and of itself is a stark finding about an unsuspected, puzzling
issue, but a finding with extremely important welfare implications for one's
quality of life in old age."
While pension benefits and retirement
were found to lead to improved health, these programs also induced a stark and
much more negative influence on other dimensions: social activities, activities
associated with mental fitness and social engagement, more broadly.
"For cognition among the elderly,
it looks like the negative effect on social engagement far outweighed the
positive effect of the program on nutrition and sleep," said Nikolov.
"Or alternatively, the kinds of things that matter and determine better
health might simply be very different than the kinds of things that matter for
better cognition among the elderly. Social engagement and connectedness may
simply be the single most powerful factors for cognitive performance in old
age."
Nikolov said he hopes this research will
help create new policies to improve the cognitive functioning of older
generations during retirement.
"We hope our findings will
influence retirees themselves but perhaps, more importantly, it will influence
policymakers in developing countries," Nikolov said. "We show robust
evidence that retirement has important benefits. But it also has considerable
costs. Cognitive impairments among the elderly, even if not severely
debilitating, bring about a loss of quality of life and can have negative
welfare consequences. Policymakers can introduce policies aimed at buffering the
reduction of social engagement and mental activities. In this sense, retirement
programs can generate positive spillovers for health status of retirees without
the associated negative effect on their cognition."
Nikolov plans to continue research on
this topic and examine how the introduction of pension benefits led to
responses of labor force participation among the elderly in rural China.
The paper, "Do Pension Benefits
Accelerate Cognitive Decline? Evidence from Rural China," was published in
the IZA Institute of Labor Economics.
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