Does Retirement Make you Happy? A Simultaneous Equations Approach*

Accounting for the joint determination of retirement, income, depression, and life satisfaction, it is found that retirement reduces the probability of depression and increases life satisfaction, but that income does not affect much depression or life satisfaction, once other factors are accounted for. Household wealth, being married, and educational attainment increase life satisfaction and reduce the probability of depression; the opposite is true for difficulties with activities of daily living.