Changes in Consumption at Retirement: Evidence from Panel Data

Attanasio, Orazio; Aguila, Emma; Meghir, Costas

doi:10.1162/rest_a_00140

“…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: 74%

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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“…First and perhaps most fundamentally, Aguila, Attanasio, and Meghir (2011) do not find any expenditure drop after retirement at all for non-durable consumption goods, using micro panel data for the US. A very similar result for German expenditure survey data was found by Beznoska and Steiner (2012).…”

Section: Introductionmentioning

confidence: 76%

Leisure and Housing Consumption after Retirement: New Evidence on the Life-Cycle Hypothesis

Schreiber

¹

,

Beblo

²

2016

SSRN Journal

0

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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 AbstractWe revisit the alleged retirement consumption puzzle. According to the life-cycle theory, foreseeable income reductions such as those around retirement should not affect consumption. However, we first recall that given higher leisure endowments after retirement, the theory does predict a fall of total market consumption expenditures. In order not to mistake this predicted drop for a puzzle we focus on housing consumption which can be plausibly regarded as complementary to leisure, and we control for the leisure change in our empirical specifications, using micro data for Germany (SOEP), where housing expenditures are observable as rents for the majority (60%), as well as dwelling relocations. We still find significant negative impacts of the retirement status on housing consumption, which is hard to reconcile with the life-cycle theory. For retirees we also find significant effects of the income reduction at retirement on housing. However, the effects are small in quantitative terms, given the lock-in nature of past housing decisions. Keywords: consumption smoothing, retirement-consumption puzzle, SOEP JEL codes: D91 (Intertemporal Consumer Choice; Life Cycle Models and Saving), E21 (Consumption; Saving; Wealth) * We thank Aunt Ingrid for (unknowingly) inspiring this paper. We also thank seminar participants at the IMK, Free University Berlin, the MEA SAVE conference, the Econometric Society World Congress, University Magdeburg, University Paris 1 Panthéon-Sorbonne, and the European Economic Association meeting for helpful comments, especially Viktor Steiner and Michael Hurd.† Beblo: University of Hamburg, miriam.beblo@wiso.uni-hamburg.de; Schreiber (corresponding author): Macroeconomic Policy Institute Düsseldorf (IMK) at Hans Boeckler Foundation, and Free University Berlin, svetosch@gmx.net, fax +49-211-7778-4596.‡ Earlier versions of this paper have been circulated already in 2010 under a different title, but given the rare-event nature of our study in the restricted relevant SOEP sample we had to wait for more panel waves to appear. The theoretical section has also been sharpened, and the overall role of leisure has been made explicit.

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“…In addition, recently Li, Shi, and Wu (2015) explore expenditure changes at retirement in China using the UHS data. 3 Unlike the existing studies, we focus on separating price changes from quantity changes at retirement when retirement is fully anticipated. We also investigate how food-shopping time changes.…”

Section: Relationship To Existing Studiesmentioning

confidence: 99%

Mandatory Retirement and the Consumption Puzzle: Prices Decline or Quantities Decline?

Dong

¹

,

Yang

²

2016

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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 ABSTRACTThis paper investigates household consumption changes at retirement by utilizing a comprehensive, diary-based household survey from China. The survey contains both consumption quantity and price information, which permits separating quantity changes from price changes. The mandatory retirement policy in China provides a quasi-experimental setting for identification of the true causal effects of fully anticipated retirement. Using regression discontinuity models, we show that food expenditure declines at retirement, particularly among the low-education group, and that the decline is driven by price declines instead of quantity declines. Shopping time for food increases at retirement, consistent with the price and quantity changes. JEL Classification Codes: J26, C21Key Words: Retirement-consumption puzzle, Mandatory retirement, Regression discontinuity, Consumption vs. expenditure, Time use, Home production. Acknowledgments:The authors would like to thank James Heckman, Michael Hurd, Robert Pollak, Josh Angrist, Daron Acemoglu, Amy Finkelstein, Michael Greenstone, David Autor, Esther Duflo, Jim Poterba, Kerwin Charles, seminars participants at MIT, and participants at the CEA, WEAI, CES annual conference for helpful comments. All errors are our own. This research is partly supported by an Early Career Research Grant from the W. E. Upjohn Institute for Employment Research. Mandatory Retirement and the Consumption Puzzle:Prices Decline or Quantities Decline?Yingying Dong, Dennis Yang * † University of California, Irvine, and University of Virginia February 2016 AbstractThis paper investigates household consumption changes at retirement by utilizing a comprehensive, diary-based household survey from China. The survey contains both consumption quantity and price information, which permits separating quantity changes from price changes. The mandatory retirement policy in China provides a quasi-experimental setting for identification of the true causal effects of fully anticipated retirement. Using regression discontinuity models, we show that food expenditure declines at retirement, particularly among the loweducation group, and that the decline is driven by price declines instead of quantity declines. Shopping time for food increases at retirement, consistent with the price and quantity changes. JEL codes: J26, C21

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Changes in Consumption at Retirement: Evidence from Panel Data

Cited by 74 publications

References 22 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

Leisure and Housing Consumption after Retirement: New Evidence on the Life-Cycle Hypothesis

Mandatory Retirement and the Consumption Puzzle: Prices Decline or Quantities Decline?

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