Influence of Social Networks on the Effect of Retirement on Cognition

This project examines the role of social networks as a potential mechanism in the relationship between retirement and cognitive decline. First, I analyze the effect of retirement on different social network characteristics using novel panel data of 19,999 respondents on social networks from wave 4 and wave 6 of the Survey of Health, Ageing and Retirement in Europe (SHARE). Second, I estimate the effect of retirement on cognition under consideration of changing social network sizes. Unobserved individual heterogeneity and endogeneity of the retirement decision can be controlled by applying instrumental variable fixed effects regressions based on country-specific statutory eligibility ages. The results suggest that retirement leads to an increase in the number of close family members named as confidants, indicating that the social network becomes more kin-oriented after retirement. However, adding close family members to the social network does not have a significant effect on cognition. In turn, adding non-family members like friends or colleagues to the social network has a positive impact on the cognitive performance. Since I do not find that retirement impacts the number of friends or colleagues significantly, I cannot claim social networks to be the explaining underlying mechanism in the relationship between retirement and cognitive decline.