This paper investigates consumer expenditures of German households pre- and post-retirement. The widely observed distinct drop in spending upon retirement entry poses an empirical puzzle since life cycle theory predicts smoothing of the marginal utility of consumption over time. As one explanation, I explore the role of home production as a substitute for consumer expenses. Taking a combined look at consumer expenditures and time use pre and post-retirement, I find a significant drop of about 17% of pre-retirement expenses at retirement which coincides with an increase in time spent on home production of an additional 33% per day.
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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number
07-13.
Length: 19 pages Date of creation: 30 Mar 2007 Date of revision: Handle: RePEc:xrs:sfbmaa:07-13
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