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Retirement and Consumption in a Life Cycle Model

  • David M. Blau

Consumption expenditure declines sharply at the time of retirement for many households, but the majority maintain a smooth consumption path. A simple life cycle model with uncertainty about the time of retirement can account for this pattern. A richer version of the model is calibrated to data from the Health and Retirement Study (HRS). The median change in consumption expenditure at retirement generated by the model is zero, while the mean is negative, matching the HRS data. However, the magnitude of the drop in consumption among households that experience a decline is too small in the model compared to the data.

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File URL: http://dx.doi.org/10.1086/522066
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 26 (2008)
Issue (Month): ()
Pages: 35-71

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Handle: RePEc:ucp:jlabec:v:26:y:2008:p:35-71
DOI: 10.1086/522066
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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