Spillover effects of retirement: Does health vulnerability matter?

Abstract

The current literature investigating the impact of retirement and the associated spousal spillover effects overlooks the unintended effects of retirement on spouses in vulnerable health, namely spouses with long-term health conditions (LTHCs). In this paper, we fill this gap in the literature and investigate the impact of an individual's retirement on their partner's health outcomes when their partner has LTHCs. Given the inherent identification challenges associated with entry into retirement, we use the pension-qualifying age in Australia as an instrument. Based on data from the Household Income and Labour Dynamics in Australia survey, we find that the husband's retirement has a positive impact on the wife's quality-adjusted life years (QALY) and other physical and mental health outcomes. We also identify redistribution of domestic workload as a key transmission mechanism of the spousal spillover effects. Women with LTHCs will see their QALY and health improve only if their husband devotes more time to domestic tasks after retirement.