Many economic models propose that individuals acquire human capital simply by doing their jobs – the “learning-by-doing” theory. But is the converse true? Do workers lose mental acuity when they are not working? In particular, does early retirement lead to atrophy of more general mental function? Rohwedder and Willis use a comparable international dataset on memory – essentially, people are asked to remember as many words as they can from a list of 10 for five minutes – and show that countries with higher percentages of early retirement and higher marginal tax rates on labor see a faster decline in memory after retirement. As a causal identification strategy, the authors use the fact that national retirement policies are unlikely to be determined by the research into declining mental fortitude among the retired.
http://www.rand.org/pubs/working_papers/2009/RAND_WR711.pdf (Final WP – full version in Winter 2010 JEP)
A Fine Theorem 