This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Retirement and Consumption in a Life Cycle Model

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
David M. Blau () (Ohio State University and IZA)

Additional information is available for the following registered author(s):

Abstract

Consumption expenditure declines sharply at the time of retirement for many households, but the majority maintain a smooth consumption path. A simple life cycle model with uncertainty about the time of retirement can account for this pattern. A richer version of the model is calibrated to data from the Health and Retirement Study. The median change in consumption expenditure at retirement generated by the model is zero, while the mean is negative, matching the HRS data. However, the magnitude of the drop in consumption among households that experience a decline is too small in the model compared to the data.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://repec.iza.org/RePEc/Discussionpaper/dp2986.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2986.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 49 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2986

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

For technical questions regarding this item, or to correct its listing, contact: (Mark Fallak).

Related research
Keywords: retirement; consumption; saving; life cycle model;

Other versions of this item:

Find related papers by JEL classification:
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    Other versions:
  2. John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation And The Propensity To Plan," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1007-1047, August. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!] (restricted)
    Other versions:
  4. Keane, Michael P & Wolpin, Kenneth I, 1994. "The Solution and Estimation of Discrete Choice Dynamic Programming Models by Simulation and Interpolation: Monte Carlo Evidence," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 648-72, November. [Downloadable!] (restricted)
    Other versions:
  5. Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 03-12, RAND Corporation Publications Department. [Downloadable!]
    Other versions:
  6. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
  7. Poterba, James M & Venti, Steven F & Wise, David A, 1996. "How Retirement Saving Programs Increase Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 91-112, Fall. [Downloadable!] (restricted)
  8. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February. [Downloadable!] (restricted)
  9. Shelly Lundberg & Richard Startz & Steven Stillman, 2001. "The Retirement-Consumption Puzzle: A Marital Bargaining Approach," Working Papers 01-04, RAND Corporation Publications Department. [Downloadable!]
    Other versions:
  10. Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January. [Downloadable!] (restricted)
  12. Edward P. Lazear, 1994. "Some Thoughts on Savings," NBER Chapters, in: Studies in the Economics of Aging, pages 143-180 National Bureau of Economic Research, Inc. [Downloadable!]
  13. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-88, September. [Downloadable!] (restricted)
    Other versions:
  14. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August. [Downloadable!] (restricted)
    Other versions:
  15. Engen, Eric M & Gale, William G & Scholz, John Karl, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-38, Fall. [Downloadable!] (restricted)
  16. David I. Laibson & Andrea Repetto & Jeremy Tobacman, 1998. "Self-Control and Saving for Retirement," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998-1), pages 91-196. [Downloadable!]
  17. Nicole Maestas, 2004. "Back to Work: Expectations and Realizations of Work After Retirement," Working Papers wp085, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  18. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January. [Downloadable!] (restricted)
    Other versions:
  19. John Laitner & Dan Silverman, 2005. "Estimating Life-Cycle Parameters from Consumption Behavior at Retirement," NBER Working Papers 11163, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  20. Raffaele Miniaci & Chiara Monfardini & Guglielmo Weber, 2003. "Is there a retirement consumption puzzle in Italy?," IFS Working Papers W03/14, Institute for Fiscal Studies. [Downloadable!]
  21. Sarah Smith, 2006. "The Retirement-Consumption Puzzle and Involuntary Early Retirement: Evidence from the British Household Panel Survey," Economic Journal, Royal Economic Society, vol. 116(510), pages C130-C148, 03. [Downloadable!] (restricted)
    Other versions:
  22. Steven Haider & Melvin Stephens Jr., 2004. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," NBER Working Papers 10257, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  23. Donna B. Gilleskie & David M. Blau, 2006. "Health insurance and retirement of married couples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 935-953. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Erich Battistin & Agar Brugiavini & Enrico Rettore & Guglielmo Weber, 2008. "The retirement consumption puzzle: evidence from a regression discontinuity approach," IFS Working Papers W08/05, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  2. Mette Christensen, 2008. "Demand patterns around retirement: Evidence from Spanish panel data," The School of Economics Discussion Paper Series 0809, Economics, The University of Manchester. [Downloadable!]
  3. Michael Hurd & Susann Rohwedder, 2006. "Some Answers to The Retirement-Consumption Puzzle," Working Papers 342, RAND Corporation Publications Department. [Downloadable!]
    Other versions:
  4. Hugo Benítez-Silva & Richard Disney & Sergi Jiménez Martín, 2009. "Disability, Capacity for Work and the Business Cycle: An International Perspective," Working Papers 2009-28, FEDEA. [Downloadable!]
    Other versions:
  5. Rob Euwals & Daniel J. van Vuuren & Ronald P. Wolthoff, 2006. "Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform," Tinbergen Institute Discussion Papers 06-021/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  6. Titus Galama & Arie Kapteyn & Raquel Fonseca & Pierre-Carl Michaud, 2008. "Grossman's Health Threshold and Retirement," Working Papers 658, RAND Corporation Publications Department. [Downloadable!]
  7. Karen Kopecky, 2005. "The Trend in Retirement," Economie d'Avant Garde Research Reports 12, Economie d'Avant Garde. [Downloadable!]
    Other versions:
  8. Michael D. Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities in Retirement," Working Papers wp096, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
    Other versions:
  9. Hugo Benitez-Silva & Frank Heiland, 2008. "Early Retirement, Labor Supply, and Benefit Withholding: The Role of the Social Security Earnings Test," Working Papers wp183, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  10. Bas Jacobs, 2009. "Is Prescott right? Welfare state policies and the incentives to work, learn, and retire," International Tax and Public Finance, Springer, vol. 16(2), pages 253-280, April. [Downloadable!] (restricted)
    Other versions:
  11. Raquel Fonseca & Thepthida Sopraseuth, 2006. "Welfare Effects of Social Security Reforms Across Europe: The Case of France and Italy," Working Papers 437, RAND Corporation Publications Department. [Downloadable!]
    Other versions:
  12. Mariacristina De Nardi & Eric French & John Bailey Jones, 2005. "Differential mortality, uncertain medical expenses, and the saving of elderly singles," Working Paper Series WP-05-13, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by editing a NEP report.

This page was last updated on 2009-11-23.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.