How does retirement affect healthcare expenditures? Evidence from a change in the retirement age

Using individual-level administrative panel data from Hungary, we estimate causal effects of retirement on outpatient and inpatient care expenditures and pharmaceutical expenditures. Our identification strategy is based on an increase in the official early retirement age of women, using that the majority of women retire upon reaching that age. According to our descriptive results, people who are working before the early retirement age have substantially lower healthcare expenditures than nonworkers, but the expenditure gap declines after retirement. Our causal estimates from a two-part (hurdle) model show that the shares of women with positive outpatient care, inpatient care, and pharmaceutical expenditures, respectively, decrease by 3.0, 1.4, and 1.3 percentage points in the short run due to retirement. These results are driven by the relatively healthy, by those who spent some time on sick leave and by the less educated. The effect of retirement on the size of positive healthcare expenditures is generally not significant.