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The impact of retirement on household consumption in Japan

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  • Stephens, Melvin
  • Unayama, Takashi

Abstract

Using monthly data from the Japanese Family Income and Expenditure Survey, we examine the impact of retirement on household consumption. We find little evidence of an immediate change in consumption at retirement, on average, in Japan. However, we find a decrease in consumption at retirement for low income households that is concentrated in food and work-related consumption. The availability of substantial retirement bonuses to a large share of Japanese retirees may help smooth consumption at retirement. We find that those households that are more likely to receive such bonuses experience a short-run consumption increase at retirement. However, among households that are less likely to receive a retirement bonus, we find that consumption decreases at retirement.

Suggested Citation

  • Stephens, Melvin & Unayama, Takashi, 2012. "The impact of retirement on household consumption in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 62-83.
  • Handle: RePEc:eee:jjieco:v:26:y:2012:i:1:p:62-83
    DOI: 10.1016/j.jjie.2011.08.001
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    References listed on IDEAS

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    1. 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.
    2. 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 2209-2226, December.
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    7. Steven J. Haider & Melvin Stephens, 2007. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 247-264, May.
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    18. Chang-Tai Hsieh, 2003. "Do Consumers React to Anticipated Income Changes? Evidence from the Alaska Permanent Fund," American Economic Review, American Economic Association, vol. 93(1), pages 397-405, March.
    19. Melvin Stephens, 2008. "The Consumption Response to Predictable Changes in Discretionary Income: Evidence from the Repayment of Vehicle Loans," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 241-252, May.
    20. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
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    23. Alan L. Gustman & Thomas L. Steinmeier, 1999. "What People Don't Know About Their Pensions and Social Security: An Analysis Using Linked Data from the Health and Retirement Study," NBER Working Papers 7368, National Bureau of Economic Research, Inc.
    24. Lusardi, Annamaria, 1996. "Permanent Income, Current Income, and Consumption: Evidence from Two Panel Data Sets," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 81-90, January.
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    Citations

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    Cited by:

    1. Patrick Moran & Martin Orquote Connell & Cormac Orquote Dea & Francesca Parodi, 2021. "Heterogeneity in Household Spending and Well-being around Retirement," Working Papers wp427, University of Michigan, Michigan Retirement Research Center.
    2. Hori, Masahiro & Shimizutani, Satoshi, 2012. "Do households smooth expenditure over anticipated income changes? Evidence from bonus payments to public employees in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 405-433.
    3. Melvin Stephens Jr & Takashi Unayama, 2015. "Child Benefit Payments and Household Wealth Accumulation," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 447-465, December.
    4. Toshiyuki Uemura & Yoshimi Adachi & Tomoki Kitamura, 2017. "Effects of Individual Resident Tax on the Consumption of Near-Retired Households in Japan," Discussion Paper Series 161, School of Economics, Kwansei Gakuin University, revised May 2017.
    5. Shunji Tada & Koyo Miyoshi, 2015. "Verifying household incomes in Japanese statistics," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 11(4), pages 531-546, September.
    6. UNAYAMA Takashi & KOMURA Norihiro & HATTORI Takahiro, 2021. "Impacts of Cash Transfers on Consumption during the COVID-19 Pandemic: Evidence from Japanese Special Cash Payment (Japanese)," Discussion Papers (Japanese) 21022, Research Institute of Economy, Trade and Industry (RIETI).
    7. Melvin Stephens Jr. & Desmond Toohey, 2018. "Changes in Nutrient Intake at Retirement," NBER Working Papers 24621, National Bureau of Economic Research, Inc.
    8. David B. Cashin, 2017. "The Household Expenditure Response to a Consumption Tax Rate Increase," Finance and Economics Discussion Series 2017-035, Board of Governors of the Federal Reserve System (U.S.).
    9. David Cashin & Takashi Unayama, 2016. "Measuring Intertemporal Substitution in Consumption: Evidence from a VAT Increase in Japan," The Review of Economics and Statistics, MIT Press, vol. 98(2), pages 285-297, May.
    10. Zarul Khaliff Kamal* & Siti Mardhiah Isa & Ros Idayuwati Alaudin & Noriszura Ismail, 2018. "Adequacy of Retirement Wealth in Malaysia: Spending Behaviour Analysis," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 429-435:6.
    11. HATTORI Takahiro & KOMURA Norihiro & UNAYAMA Takashi, 2021. "Impact of Cash Transfers on Consumption during the COVID-19 Pandemic: Evidence from Japanese Special Cash Payments," Discussion papers 21043, Research Institute of Economy, Trade and Industry (RIETI).
    12. Ryosuke Okazawa & Katsuya Takii, 2019. "Intergenerational Conflict Over Consumption Tax Hike: Evidence from Japan," OSIPP Discussion Paper 19E009, Osaka School of International Public Policy, Osaka University.

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    More about this item

    Keywords

    Retirement; Household consumption; Life cycle/permanent income hypothesis; Retirement bonus;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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