Does Retirement Improve Cognitive Functioning? Causal Evidence From Vietnam

Objectives Previous studies examining the effect of retirement on cognitive functioning have primarily been conducted in developed countries with inconclusive findings. This paper contributes to the limited evidence in middle-income countries by investigating this causal relationship in Vietnam.Methods We utilized a national survey on older persons for data analysis (N = 2,123). Since individuals' decisions to retire are potentially endogenous to their cognitive functioning due to omitted factors, we exploited the official retirement ages for men and women in Vietnam as an instrumental variable for the retirement decision.Results We found that retirement improved cognitive functioning. This effect was more pronounced in rural areas but appeared homogeneous across gender and types of occupation. Further investigations on mechanisms suggest that increased hours spent on self-care, social activity engagement, media usage, and sexual activity could be potential pathways through which retirement enhances cognitive functioning.Discussion Our findings suggest that activities or interventions aimed at promoting active aging, family solidarity, and community cohesion are crucial for maintaining and improving cognitive functioning in old age.