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Consumer Expenditures and Home Production at Retirement - New Evidence from Germany

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  • Melanie Lührmann

Abstract

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 89 minutes per day, accounting for 21% of average home production. Copyright 2009 The Author. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2009.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0475.2009.00466.x
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Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 11 (2010)
Issue (Month): (05)
Pages: 225-245

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Handle: RePEc:bla:germec:v:11:y:2010:i::p:225-245
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Find related papers by JEL classification:
  • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
  • D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
  • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
  • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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  1. Daniel S. Hamermesh, 1982. "Consumption During Retirement: The Missing Link in the Life Cycle," NBER Working Papers 0930, National Bureau of Economic Research, Inc.
  2. Schwerdt, Guido, 2005. "Why does consumption fall at retirement? Evidence from Germany," Economics Letters, Elsevier, vol. 89(3), pages 300-305, December.
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  4. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," Working Papers 97035, Stanford University, Department of Economics.
  5. 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.
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  12. Joachim Merz, 2003. "Was fehlt in der EVS? - Eine Verteilungsanalyse hoher Einkommen mit der verknüpften Einkommensteuerstatistik für Selbständige und abhängig Beschäftigte," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 223(1), pages 58-90.
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  14. Deaton, A. & Paxson, C., 1993. "Intertemporal Choice and Inequality," Papers 168, Princeton, Woodrow Wilson School - Development Studies.
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  16. Dilnot, Andrew & Disney, Richard & Johnson, Paul & Whitehouse, Edward, 1994. "Pensions policy in the UK: An economic analysis," MPRA Paper 10478, University Library of Munich, Germany.
  17. Michael D. Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities in Retirement," Working Papers wp096, University of Michigan, Michigan Retirement Research Center.
  18. 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.
  19. Raffaele Miniaci & Chiara Monfardini & Guglielmo Weber, 2003. "Is there a retirement consumption puzzle in Italy?," IFS Working Papers W03/14, Institute for Fiscal Studies.
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Cited by:

  1. Nivorozhkina, Ludmila & Nivorozhkin, Anton & Abazieva, Kamilla, 2010. "Drop in consumption associated with retirement. The regression discontinuity design approach," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 19(3), pages 112-126.
  2. Emanuele Ciani, 2016. "Retirement, pension eligibility and home production," Temi di discussione (Economic working papers) 1056, Bank of Italy, Economic Research and International Relations Area.
  3. Velarde, Melanie & Herrmann, Roland, 2014. "Time use for consumption and household production of food: is there a retirement-consumption puzzle in Germany?," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182829, European Association of Agricultural Economists.
  4. Martin Browning & Thomas Crossley & Melanie Lührmann, 2012. "Durable Purchases over the Later Life Cycle," Koç University-TUSIAD Economic Research Forum Working Papers 1213, Koc University-TUSIAD Economic Research Forum.
  5. Peine, Alexander & Rollwagen, Ingo & Neven, Louis, 2014. "The rise of the “innosumer†—Rethinking older technology users," Technological Forecasting and Social Change, Elsevier, vol. 82(C), pages 199-214.
  6. Peine & Ingo Rollwagen & Louis Neven, 2012. "Exploring new patterns of user involvement – baby boomers and the future of consumption," Innovation Studies Utrecht (ISU) working paper series 12-09, Utrecht University, Department of Innovation Studies, revised Sep 2012.

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