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

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

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.

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