Does Financial Difficulty Damage Cognitive Function

This study aims to estimate the effect of financial difficulty on cognitive function in a sample of the Japanese elderly population, using a panel dataset which includes randomly selected elderly Japanese citizens aged 60 and over from the National Survey of the Japanese Elderly. It is appropriate dataset to capture the effect on cognitive impairment in the sense that cognitive function can gradually degenerate after retirement in many cases. We estimate the effect of household income on the probability of the onset of cognitive impairment at a following survey point using random-effect probit model. There is a significant negative effect from financial difficulty on cognitive function. When participants’ household income drops by 1%, they are 2.2% more likely to develop cognitive impairment. Financial support plays an important role in improving recipients’cognitive function. It should be noted that we found the effect of financial difficulty even in Japan which has a universal health coverage.