The retirement consumption conundrum: Evidence from a consumption survey

Fisher, Jonathan; Johnson, David S.; Marchand, Joseph; Smeeding, Timothy M.; Torrey, Barbara Boyle

doi:10.1016/j.econlet.2007.09.030

“…In contrast to some of the earlier studies which found significant reductions in food expenditures at the time of retirement, recent literature has looked at broader consumption measures than just food expenditures and found, consistent with the standard life-cycle model, no significant consumption drop (see, e.g., Fisher et al (2008), Aguila et al (2011)). For the great majority of households, expenditures on food constitute a relatively small share of household budgets, and the relevance of changes in specific expenditure components for testing the life-cycle model seems questionable.…”

Section: Introductionmentioning

confidence: 41%

Does Consumption Decline at Retirement? Evidence from Repeated Cross-Section Data for Germany

Beznoska

¹

,

Steiner

²

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe life-cycle hypothesis implies that consumption would not decline at retirement. However, several studies found relevant declines in food consumption after retirement for the United States. Others concluded that this contradiction of the life-cycle hypothesis is solved by allowing for broader measures of consumption than food. Using repeated crosssection data for Germany, this paper analyzes the retirement consumption puzzle for the German case. For our broadest consumption measure, which includes the flow of durables' consumption, we find, on average, no significant consumption decline at retirement. This also holds if the potential endogeneity of indidual retirement is controlled for in instrumental variable regressions. We also find heterogeneity in retirement effects among birth cohorts, the level of household wealth, and the level of consumption, but these effects do not support the hypothesis that retirement is associated with a strong reduction of consumption among poorer households.

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“…Most of the literature on the relation between (male) retirement and consumption relates to the United States (see, for instance, Hamermesh, 1984;Aguiar and Hurst, 2013;Fisher et al, 2008;Lundberg et al, 2003) or the United Kingdom (see for example, Banks et al, 1998) or Italy (Battistin et al, 2009;Miniaci et al, 2010). It seems relevant to study the effect of retirement on household consumption in France, which is characterized by different earnings profiles and retirement institutions than the UK, the USA or Italy.…”

Section: Introductionmentioning

confidence: 99%

Household Consumption at Retirement: A Regression Discontinuity Study on French Data

Moreau¹,

Stancanelli²

2015

Annals of Economics and Statistics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 7709 October 2013 ABSTRACT Household Consumption at Retirement: A Regression Discontinuity Study on French DataEarlier literature has investigated the drop in household consumption upon retirement of the head of the household, the so-called "retirement consumption puzzle". Here, we expand on these studies by considering also retirement of the wife, thus distinguishing households in which the wife is a "housewife" from 'dual-earners'. We use a regression discontinuity approach to estimate the effect of each partner's retirement on household consumption. We use for the analysis data drawn from the French Consumer Budget Survey 2001 that collected two-week expenditure diaries. We find a significant and sizable drop in food and clothes expenditure upon retirement of the male partner. However, the drop in food expenditure is not robust to specification checks and it becomes statistically insignificant when dropping from the sample couples in which the wife is a housewife. JEL Classification:D12, J22, J14, C1

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“…3 This phenomenon has been used lately to explain why consumption appears to drop upon retirement. It turns out that when flows of consumption from homes are included, this drop may be smaller than previously thought (Fisher, Johnson, Marchand, Smeeding, and Torrey 2005). 4 This use of a homogeneous form of value has been one strategy used to circumvent in capital theory problems associated with multiple produced means of production.…”

Section: Notesmentioning

confidence: 92%

A Random Walk Down Maple Lane? A Critique of Neoclassical Consumption Theory with Reference to Housing Wealth

Hannsgen

¹

2007

Review of Political Economy

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The development of the permanent income/life cycle consumption hypothesis was a key blow to Keynesian and Kaleckian economics, and, according to George Akerlof, it "set the agenda" for modern neoclassical macroeconomics. This paper focuses on the relationship of housing wealth to neoclassical consumption theory, and in particular, the degree to which homes can be treated collectively with other forms of "permanent income." The neoclassical analysis is evaluated as a partly normative and partly positive one, in recognition of the dual function of the neoclassical theory of rationality. The paper rests its critique primarily on the distinctive role of homes in social life; theories that fail to recognize this role jeopardize the social and economic goods at stake. Since many families do not own large amounts of assets other than their places of residence, these issues have important ramifications for the relevance of consumption theory as a whole.JEL Codes: A130, B400, B500, E210

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The retirement consumption conundrum: Evidence from a consumption survey

Cited by 46 publications

References 20 publications

Does Consumption Decline at Retirement? Evidence from Repeated Cross-Section Data for Germany

Does Consumption Decline at Retirement? Evidence from Repeated Cross-Section Data for Germany

Household Consumption at Retirement: A Regression Discontinuity Study on French Data

A Random Walk Down Maple Lane? A Critique of Neoclassical Consumption Theory with Reference to Housing Wealth

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