Melbourne Institute Working Paper Series

required task and working hours, that is, the quality and the quantity of work. There are number of studies which examine the effects of the quality of work (job type and job task) on cognitive functioning (Schooler et al., 1999; Bosma et al., 2003; Potter et al.,. 2008; Finkel et al., 2009; Marquié et al., 2010; Smart et al., 2014).
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Melbourne Institute Working Paper Series Working Paper No. 7/16 Use It Too Much and Lose It? The Effect of Working Hours on Cognitive Ability Shinya Kajitani, Colin McKenzie and Kei Sakata

Use It Too Much and Lose It? The Effect of Working Hours on Cognitive Ability* Shinya Kajitani†, Colin McKenzie‡ and Kei Sakata§ †

Faculty of Economics, Meisei University; and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne ‡ Faculty of Economics, Keio University § Faculty of Economics, Ritsumeikan University

Melbourne Institute Working Paper No. 7/16 ISSN 1328-4991 (Print) ISSN 1447-5863 (Online) ISBN 978-0-7340-4405-1 February 2016 * We would like to thank Jongsay Yong for his helpful comments and suggestions. The first and third authors gratefully acknowledge the financial assistance of a Japan Society for the Promotion of Science (JSPS) Grant in Aid for Scientific Research (B) No. 24330093 for a project on “Retirement Behaviour of the Aged and their Cognitive Ability and Health”. The first author also gratefully acknowledges the financial assistance of a grant from the Meisei University Special Research Leave Program Fund for a project on “The Impact of the Working Hours on Health and Cognitive Functioning for Middle-aged and Older Australians”. The second author gratefully acknowledges the financial assistance of a grant from the Fund to Promote Academic Research for a project on “Empirical Research on Responses to the Aging Problems of Japan’s Economy”. This paper uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this paper, however, are those of the authors and should not be attributed to either DSS or the Melbourne Institute. No ethic approval was required for this study. Corresponding author: Colin McKenzie <[email protected]>.

Melbourne Institute of Applied Economic and Social Research The University of Melbourne Victoria 3010 Australia Telephone (03) 8344 2100 Fax (03) 8344 2111 Email [email protected] WWW Address http://www.melbourneinstitute.com

Abstract Using data from Wave 12 of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, we examine the impact of working hours on the cognitive ability of people living in Australia aged 40 years and older. Three measures of cognitive ability are employed: the Backward Digit Span; the Symbol Digits Modalities; and a 25-item version of the National Adult Reading Test. In order to capture the potential non-linear dependence of cognitive ability on working hours, the model for cognitive ability includes working hours and its square. We deal with the potential endogeneity of the decision of how many hours to work by using the instrumental variable estimation technique. Our findings show that there is a non-linearity in the effect of working hours on cognitive functioning. For working hours up to around 25 hours a week, an increase in working hours has a positive impact on cognitive functioning. However, when working hours exceed 25 hours per week, an increase in working hours has a negative impact on cognition. Interestingly, there is no statistical difference in the effects of working hours on cognitive functioning between men and women. JEL classification: I10, J22, J26 Keywords: Cognitive ability, endogeneity, retirement, working hours

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1. Introduction Many countries have already increased their retirement ages by delaying the age at which people are eligible to start receiving pension payments. This means that more people continue to work in the later stages of their life. Some claim that delaying the retirement age can potentially help reduce the deterioration of cognitive functioning because of the continued intellectual stim