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Consumption, Income, and Retirement

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  • A. L. Robb
  • J. B. Burbidge

Abstract

The authors use Canadian Family Expenditure Survey data to estimate consumption and income age profiles for married-couple families, paying attention to the transition between work and retirement. The common presumptions of numerical-simulation life-cycle models--upward-sloping consumption-age profiles and dissaving in retirement--are not supported. There is some evidence that the consumption of certain (blue-collar) households declines discontinuously near retirement, which casts doubt upon the frequently encountered assumption that the marginal utility of consumption is independent of the quantity of leisure consumed. The results also imply that the functional form of Euler equations should be sufficiently flexible to permit preretirement consumption to have an inverted U-shape. In addition, the paper shows that the uncertain lifetime model, with the addition of a bequest motive, can rationalize the empirical results.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 22 (1989)
Issue (Month): 3 (August)
Pages: 522-42

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Handle: RePEc:cje:issued:v:22:y:1989:i:3:p:522-42

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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Citations

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Cited by:
  1. Lundberg, Shelly & Startza, Richard & Stillman, Steven, 2003. "The retirement-consumption puzzle: a marital bargaining approach," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1199-1218, May.
  2. Aydogan Ulker, 2004. "Consumption Patterns around the Time of Retirement: Evidence from the Consumer Expenditure Surveys," Econometric Society 2004 Australasian Meetings 54, Econometric Society.
  3. Sule Alan & Kadir Atalay & Thomas F. Crossley, 2007. "The Adequacy of Retirement Savings: Subjective Survey Reports by Retired Canadians," Quantitative Studies in Economics and Population Research Reports 418, McMaster University.
  4. Thomas F. Crossley & Yuri Ostrovsky, 2003. "A Synthetic Cohort Analysis of Canadian Housing Careers," Social and Economic Dimensions of an Aging Population Research Papers 107, McMaster University.
  5. Eric M. Engen & William G. Gale & Cori E. Uccello, 2004. "Effects of Stock Market Fluctuations on the Adequacy of Retirement Wealth Accumulation," Working Papers, Center for Retirement Research at Boston College 2004-16, Center for Retirement Research.
  6. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," NBER Working Papers 6227, National Bureau of Economic Research, Inc.
  7. Yingying Dong, 2012. "Regression Discontinuity Applications with Rounding Errors in the Running Variable," Working Papers 111206, University of California-Irvine, Department of Economics.
  8. Sabelhaus, John & Schneider, Ulrike, 1997. "Measuring The Distribution Of Well-Being: Why Income and Consumption Give Different Answers," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-201, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  9. Casey B. Mulligan & Tomas J. Philipson, 2000. "Merit Motives and Government Intervention: Public Finance in Reverse," NBER Working Papers 7698, National Bureau of Economic Research, Inc.
  10. Drescher, Larissa S. & Roosen, Jutta, 2010. "An Analysis Of The Retirement-Consumption Puzzle For Food-At-Home And Away-From-Home Expenditures In Germany," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116441, European Association of Agricultural Economists & Agricultural and Applied Economics Association.
  11. Almudena Sevilla-Sanz & Maria Jose Luengo-Prado, 2010. "Consumption, Retirement and Life-cycle Prices: Evidence From Spain," Economics Series Working Papers 498, University of Oxford, Department of Economics.
  12. B. Douglas Bernheim & Antonio Rangel, 2005. "Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers," Discussion Papers 04-033, Stanford Institute for Economic Policy Research.
  13. Kevin Huang & Frank Caliendo, 2011. "Rationalizing multiple consumption-saving puzzles in a unified framework," Frontiers of Economics in China, Springer, vol. 6(3), pages 359-388, September.
  14. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1993. "The Role of Pensions in the Labor Market," NBER Working Papers 4295, National Bureau of Economic Research, Inc.

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