The Retirement-Consumption Puzzle: Actual Spending Change in Panel Data
AbstractThe simple one-good model of life-cycle consumption requires that consumption be continuous over retirement; yet prior research based on partial measures of consumption or on synthetic panels indicates that spending drops at retirement, a result that has been called the retirement-consumption puzzle. Using panel data on total spending, nondurable spending and food spending, the authors find that spending declines at small rates over retirement, at rates that could be explained by mechanisms such as the cessation of work-related expenses, unexpected retirement due to a health shock or by the substitution of time for spending. In the low-wealth population where spending did decline at higher rates, the main explanation for the decline appears to be a high rate of early retirement due to poor health. They conclude that at the population level there is no retirement-consumption puzzle in their data, and that in subpopulations where there were substantial declines, conventional economic theory can provide the main explanation.
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Bibliographic InfoPaper provided by RAND Corporation Publications Department in its series Working Papers with number 563.
Length: 51 pages
Date of creation: Apr 2008
Date of revision:
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More information through EDIRC
retirees-economic conditions; retirement-economic aspects; consumption; panel data;
Other versions of this item:
- Michael D. Hurd & Susann Rohwedder, 2008. "The Retirement Consumption Puzzle: Actual Spending Change in Panel Data," NBER Working Papers 13929, National Bureau of Economic Research, Inc.
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
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- 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.
- Erich Battistin & Agar Brugiavini & Enrico Rettore & Guglielmo Weber, 2009. "The Retirement Consumption Puzzle: Evidence from a Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 99(5), pages 2209-26, December.
- Agar Brugiavini & Erich Battistin, & Enrico Rettore & Guglielmo Weber, 2007. "The Retirement Consumption Puzzle: Evidence from a Regression Discontinuity Approach," Working Papers 2007_27, Department of Economics, University of Venice "Ca' Foscari".
- James Banks & Richard Blundell & Sarah Tanner, 1995.
"Is there a retirement-savings puzzle?,"
IFS Working Papers
W95/04, Institute for Fiscal Studies.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The crisis, and Nudge
by chris dillow in Stumbling and Mumbling on 2008-09-22 15:00:32
- The Retirement Consumption Puzzle: Actual Spending Change in Panel Data
by Liam Delaney in Geary Behaviour Centre on 2009-08-07 15:54:00
- Eichhorst, Werner & Gerard, Maarten & Kendzia, Michael J. & Mayrhuber, Christine & Nielsen, Conny & Rünstler, Gerhard & Url, Thomas, 2011. "Report No. 42: Pension Systems in the EU – Contingent Liabilities and Assets in the Public and Private Sector," IZA Research Reports 42, Institute for the Study of Labor (IZA).
- Mark A. Aguiar & Erik Hurst & Loukas Karabarbounis, 2011. "Time Use During Recessions," NBER Working Papers 17259, National Bureau of Economic Research, Inc.
- Yingying Dong, 2012. "Regression Discontinuity Applications with Rounding Errors in the Running Variable," Working Papers 111206, University of California-Irvine, Department of Economics.
- Carlo Mazzaferro & Marcello Morciano & Elena Pisano & Simone Tedeschi, 2010. "The Introduction of a Private Wealth Module in CAPP_DYN: an Overview," Department of Economics 0630, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
- Carlo Mazzaferro & Marcello Morciano & Elena Pisano & Simone Tedeschi, 2010. "Modelling Private Wealth Accumulation and Spend-down in the Italian Microsimulation Model CAPP_DYN: A Life-Cycle Approach," Center for the Analysis of Public Policies (CAPP) 0073, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica, revised Nov 2010.
- Raffaele Miniaci & Chiara Monfardini & Guglielmo Weber, 2010. "How does consumption change upon retirement?," Empirical Economics, Springer, vol. 38(2), pages 257-280, April.
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