Essays on Subjective Well-Being and Retirement Behavior
This thesis consists of two chapters. In the first chapter, we are primarily interested in the effect of expectations on psychological well-being of Americans over age 50 and their spouses. In order to circumvent mood effects on both independent and dependent variables, we devise an exogenous proxy for life expectancy of parents. Using the life table survival probabilities, we examine the effect of expectations on psychological well-being and conclude whether psychological well-being is a forward- looking phenomenon in this context.
The sensitivity of psychological well-being to longevity expectations may indicate that older workers anticipate future events and they might incorporate these predictions into their economic decisions. The predictions about life expectancy might particularly affect the choice of retirement timing and leisure preferences of older workers. Therefore, in the second chapter of this thesis we investigate the link between retirement behavior and longevity expectations which are gathered from population life tables. Overall, the findings of this thesis are as follows: i) there is a causal relationship between longevity expectations and current psychological well-being of individuals, ii) individuals experience less mental distress as their mothers’ life expectancy increases, iii) there is a nonlinear relationship between life expectancy and probability of retirement, iv) on average, increased life expectancy leads to delay in retirement.