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The retirement consumption puzzle revisited: Evidence from the mandatory retirement policy in China

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  • Li, Hongbin
  • Shi, Xinzheng
  • Wu, Binzhen

Abstract

Using data from China's Urban Household Survey and exploiting China's mandatory retirement policy, we use the regression discontinuity approach to estimate the impact of retirement on household expenditures. Retirement reduces total non-durable expenditures by 19%. Among the categories of non-durable expenditures, retirement reduces work-related expenditures and expenditures on food consumed at home but has an insignificant effect on expenditures on entertainment. After excluding these three components, retirement does not have an effect on the remaining non-durable expenditures. It suggests that the retirement consumption puzzle might not be a puzzle if an extended life-cycle model with home production is considered.

Suggested Citation

  • Li, Hongbin & Shi, Xinzheng & Wu, Binzhen, 2016. "The retirement consumption puzzle revisited: Evidence from the mandatory retirement policy in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 623-637.
  • Handle: RePEc:eee:jcecon:v:44:y:2016:i:3:p:623-637
    DOI: 10.1016/j.jce.2015.06.001
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    1. repec:bla:ecinqu:v:55:y:2017:i:4:p:1738-1758 is not listed on IDEAS

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    Keywords

    Retirement; Consumption puzzle; China;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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