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

Abstract

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.

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

“…A very similar result for German expenditure survey data was found by Beznoska and Steiner (2012). However, taken at face value these broad constancy findings would constitute a puzzle in the opposite direction, as we will argue in the theory section below.…”

Maintaining One's Living Standard at Old Age: What Does that Mean? Evidence Using Panel Data from Germany

“…The figure quoted here rests on own calculations for the median household Scholz, Seshadri, and Khitatrakun (2006). present their results in terms of "social security wealth" plus "optimal wealth targets".2 One of the controversies that arose is whether there is a "retirement-savings puzzle", as consumption appears to drop unexpectedly when household heads retire(Banks, Blundell, and Tanner, 1998); for a recent attempt to addressing this puzzle using German expenditure data, seeBeznoska and Steiner (2012).…”