IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Durable consumption, saving and retirement

  • Torben Andersen


  • Mikkel Hermansen


Registered author(s):

    Durables yield services through life but are also a store of value and both features may have important implications for savings and retirement decisions. Durables also affect bequests and thus induce intergenerational transfers. We show that allowing explicitly for durables has important implications for retirement decisions and responses to various changes in the environment. An improvement in the possibility of freeing housing capital makes the old retire earlier (income effect) while the young plan to retire later since they increase housing demand and reduce financial savings. Considering welfare in stationary equilibrium, we find that a reduction in wealth locking-in in durables is not necessarily welfare improving due to the effects on bequests. From a social welfare perspective, individuals tend to choose too much financial savings, too little durable acquisition and too early retirement. Copyright Springer-Verlag Berlin Heidelberg 2014

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Springer & European Society for Population Economics in its journal Journal of Population Economics.

    Volume (Year): 27 (2014)
    Issue (Month): 3 (July)
    Pages: 825-840

    in new window

    Handle: RePEc:spr:jopoec:v:27:y:2014:i:3:p:825-840
    DOI: 10.1007/s00148-013-0490-8
    Contact details of provider: Web page:

    Phone: +43-70-2468-8236
    Fax: +43-70-2468-8238
    Web page:

    More information through EDIRC

    Order Information: Web:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española, IEF, vol. 200(1), pages 41-74, March.
    2. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-83, June.
    3. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    4. Fang Yang, 2009. "Consumption over the Life Cycle: How Different is Housing?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 423-443, July.
    5. Andreas Werblow & Stefan Felder & Peter Zweifel, 2007. "Population ageing and health care expenditure: a school of 'red herrings'?," Health Economics, John Wiley & Sons, Ltd., vol. 16(10), pages 1109-1126.
    6. Maria Chiuri & Tullio Jappelli, 2010. "Do the elderly reduce housing equity? An international comparison," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 643-663, March.
    7. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," Working Papers halshs-00676492, HAL.
    8. Andersen, Torben M & Bhattacharya, Joydeep, 2012. "A Dynamic Efficiency Rationale for Public Investment in the Health of the Young," Staff General Research Papers Archive 35503, Iowa State University, Department of Economics.
    9. Peter A. Diamond, 2003. "Taxation, Incomplete Markets, and Social Security," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042134, December.
    10. Holger Kraft & Claus Munk, 2011. "Optimal Housing, Consumption, and Investment Decisions over the Life Cycle," Management Science, INFORMS, vol. 57(6), pages 1025-1041, June.
    11. Torben M. Andersen & Marias H. Gestsson, 2010. "Longevity, Growth and Intergenerational Equity - The Deterministic Case," Economics Working Papers 2010-19, Department of Economics and Business Economics, Aarhus University.
    12. Zvi Bodie & Robert C. Merton & William F. Samuelson, 1992. "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model," NBER Working Papers 3954, National Bureau of Economic Research, Inc.
    13. Rowena A. Pecchenino & Patricia S. Pollard, 1995. "The effects of annuities, bequests, and aging in an overlapping generations model of endogenous growth," Working Papers 1995-008, Federal Reserve Bank of St. Louis.
    14. Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 92-114, January.
    15. Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
    16. David Blake, 2002. "The impact of wealth on consumption and retirement behaviour in the UK," LSE Research Online Documents on Economics 24949, London School of Economics and Political Science, LSE Library.
    17. Peter Zweifel & Stefan Felder & Markus Meiers, 1999. "Ageing of population and health care expenditure: a red herring?," Health Economics, John Wiley & Sons, Ltd., vol. 8(6), pages 485-496.
    18. Vincent P. Crawford & David M. Lilien, 1981. "Social Security and the Retirement Decision," The Quarterly Journal of Economics, Oxford University Press, vol. 96(3), pages 505-529.
    19. Batljan, Ilija & Lagergren, Mårten, 2004. "Inpatient/outpatient health care costs and remaining years of life--effect of decreasing mortality on future acute health care demand," Social Science & Medicine, Elsevier, vol. 59(12), pages 2459-2466, December.
    20. Chang, Fwu-Ranq, 1991. "Uncertain Lifetimes, Retirement and Economic Welfare," Economica, London School of Economics and Political Science, vol. 58(230), pages 215-32, May.
    21. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
    22. Torben M. Andersen & Marias H. Gestsson, 2010. "Longevity, Growth and Intergenerational Equity - The Deterministic Case," Economics wp52, Department of Economics, Central bank of Iceland.
    23. Andersen, Torben M., 2008. "Increasing longevity and social security reforms--A legislative procedure approach," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 633-646, April.
    24. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
    25. Martin Farnham & Purvi Sevak, 2007. "Housing Wealth and Retirement Timing," Working Papers wp172, University of Michigan, Michigan Retirement Research Center.
    26. Cerny, Ales & Miles, David K & Schmidt, Lubomir, 2005. "The Impact of Changing Demographics and Pensions on The Demand for Housing and Financial Assets," CEPR Discussion Papers 5143, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:spr:jopoec:v:27:y:2014:i:3:p:825-840. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

    or (Rebekah McClure)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.