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Leisure and housing consumption after retirement: new evidence on the life-cycle hypothesis

Author

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  • Miriam Beblo

    (Universität Hamburg)

  • Sven Schreiber

    (Macroeconomic Policy Institute (IMK)
    Freie Universität Berlin)

Abstract

Foreseeable income reductions around retirement should not affect aggregate consumption. However, given higher leisure endowments after retirement, theory also predicts lower consumption of leisure substitutes. To avoid misinterpreting this predicted drop as a puzzle, our novel approach focuses on housing consumption (complementary to leisure in utility) and controls for leisure changes. In Germany tenants represent roughly half of all households, making many housing expenditures directly observable in micro data. We find significant negative impacts of the retirement status on housing consumption, which is hard to reconcile with life-cycle theory. Despite the lock-in nature of past housing decisions, income reductions at retirement have additional – though small – effects on housing.

Suggested Citation

  • Miriam Beblo & Sven Schreiber, 2022. "Leisure and housing consumption after retirement: new evidence on the life-cycle hypothesis," Review of Economics of the Household, Springer, vol. 20(1), pages 305-330, March.
    • Handle: RePEc:kap:reveho:v:20:y:2022:i:1:d:10.1007_s11150-021-09569-4
    DOI: 10.1007/s11150-021-09569-4
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    More about this item

    Keywords

    Consumption smoothing; Retirement-consumption puzzle; SOEP data; Housing decisions;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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