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Retirement and Consumption in a Life Cycle Model

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  • Blau, David M.

    ()
    (Ohio State University)

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.

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Bibliographic Info

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

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Length: 49 pages
Date of creation: Aug 2007
Date of revision:
Publication status: published in: Journal of Labor Economics, 2008, 26 (1), 35-71
Handle: RePEc:iza:izadps:dp2986

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

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