nep-neu New Economics Papers
on Neuroeconomics
Issue of 2023‒05‒22
three papers chosen by

  1. Gender Differences in the Effect of Retirement Duration on Cognitive Functioning By Yingying Zhang; Steve Bradley; Robert Crouchley
  2. Revisiting the Returns to Higher Education: Heterogeneity by Cognitive and Non-Cognitive Abilities By Oliver Cassagneau-Francis
  3. The Different Returns to Cognitive Ability in the Labor and Capital Markets By Bastani, Spencer; Karlsson, Kristina; Waldenström, Daniel

  1. By: Yingying Zhang; Steve Bradley; Robert Crouchley
    Abstract: Mental health problems and severe cognitive decline can affect individual behaviours and physical health, cause adverse outcomes and generate significant economic costs for the society. In this paper we contribute to the existing literature by investigating long-term retirement effects on individual health outcomes for a developing country – China. Specifically, we examine the cumulative effect of years in retirement on cognitive functioning, measured by scores in cognitive tests such as word recall test and numeracy test, separately for men and women in China. Identifying such effects can be challenging due to endogeneity issues. To overcome this problem, we use different mandatory retirement ages as instruments for blue-collar and white-collar workers using three waves (2011-2015) of data from the national China Health and Retirement Longitudinal Study. Bivariate random-effect Tobit models are estimated, which also allows us to account for the left censored nature of retirement duration. We find that retirement duration is endogenous to men’s scores in memory tests. After accounting for the observed and unobserved confounding factors, we find that one additional year in retirement reduces the number of words men recalled immediately and 10 minutes later by 0.9% and 1.7%, respectively. The effects for women are much smaller - only 25-35% of those for men. One more year in retirement reduces men’ scores in numeracy test by 0.5%, and scores in mental intactness test by 0.3%, but the effect on women’s scores are statistically insignificant. We also explore the underlying mechanisms for these effects by examining participation in various physical and social activities post-retirement.
    Keywords: Retirement Duration, Cognitive Decline, Gender Differences
    Date: 2023
  2. By: Oliver Cassagneau-Francis (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Recent work has highlighted the significant variation in returns to higher education across individuals. We develop a novel methodology-exploiting recent advances in the identification of mixture models-which groups individuals according to their prior ability and estimates the wage returns to a university degree by group. We prove the non-parametric identification of our model. Applying our method to data from a UK cohort study, our findings reflect recent evidence that skills and ability are multidimensional. Our flexible model allows the returns to university to vary across the (multi-dimensional) ability distribution, a flexibility missing from commonly used additive models, but which we show is empirically important. The returns to higher education are 3-4 times larger than the returns to prior cognitive and non-cognitive abilities. Returns are generally increasing in ability for both men and women, but vary non-monotonically across the ability distribution.
    Keywords: Mixture models, Distributions, Treatment effects, Higher education, Wages, Human capital, Cognitive and non-cognitive abilities
    Date: 2022–05–19
  3. By: Bastani, Spencer (Institute for Evaluation of Labour Market and Education Policy (IFAU)); Karlsson, Kristina (Department of Economics, Uppsala University); Waldenström, Daniel (Research Institute of Industrial Economics (IFN))
    Abstract: We investigate the returns to cognitive ability in the labor and capital markets. Using population-wide Swedish military enlistment data and administrative tax records, we find that cognitive ability is much better at predicting capital income than labor earnings. The difference is almost a factor of three and remains substantial even after controlling for education, occupation, savings, inheritance, and parental background. Moreover, ability is significantly positively correlated with wealth returns. Our results provide new insights into why inequality in capital income is greater than in labor income and shed light on the drivers of economic mobility.
    Keywords: Ability; Skills; Education; Capital income; Wealth
    JEL: D31 H20 J24
    Date: 2023–04–28

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