Does Consumption Decline at Retirement?: Evidence from Repeated Cross-Section Data for Germany
The life-cycle hypothesis implies that consumption would not decline at retirement. However, several studies found relevant declines in food consumption after retirement for the United States. Others concluded that this contradiction of the life-cycle hypothesis is solved by allowing for broader measures of consumption than food. Using repeated cross-section data for Germany, this paper analyzes the retirement consumption puzzle for the German case. For our broadest consumption measure, which includes the flow of durables' consumption, we find, on average, no significant consumption decline at retirement. This also holds if the potential endogeneity of indidual retirement is controlled for in instrumental variable regressions. We also find heterogeneity in retirement effects among birth cohorts, the level of household wealth, and the level of consumption, but these effects do not support the hypothesis that retirement is associated with a strong reduction of consumption among poorer households.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: Mohrenstraße 58, D-10117 Berlin|
Web page: http://www.diw.de/en
More information through EDIRC
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.:
- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
- Franz, Wolfgang & Steiner, Viktor, 1999.
"Wages in the East German transition process: facts and explanations,"
ZEW Discussion Papers
99-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Wolfgang Franz & Viktor Steiner, 2000. "Wages in the East German Transition Process: Facts and Explanations," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 241-269, 08.
- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
- Nancy D. Ruggles & Richard Ruggles, 1970. "Introduction to "The Design of Economic Accounts"," NBER Chapters, in: The Design of Economic Accounts, pages 1-7 National Bureau of Economic Research, Inc.
- Nancy D. Ruggles & Richard Ruggles, 1970. "The Design of Economic Accounts," NBER Books, National Bureau of Economic Research, Inc, number rugg70-1.
- Johnathan Fisher & David S. Johnson & Joseph Marchand & Timothy M. Smeeding & Barbara Boyle Torrey, 2005.
"The Retirement Consumption Conundrum: Evidence from a Consumption Survey,"
Working Papers, Center for Retirement Research at Boston College
wp2005-14, Center for Retirement Research, revised Dec 2005.
- Fisher, Jonathan D. & Johnson, David S. & Marchand, Joseph & Smeeding, Timothy M. & Torrey, Barbara Boyle, 2008. "The retirement consumption conundrum: Evidence from a consumption survey," Economics Letters, Elsevier, vol. 99(3), pages 482-485, June.
- Schwerdt, Guido, 2005. "Why does consumption fall at retirement? Evidence from Germany," Economics Letters, Elsevier, vol. 89(3), pages 300-305, December.
- Orazio Attanasio & James Banks & Matthew Wakefield, 2004. "Effectiveness of tax incentives to boost (retirement) saving: theoretical motivation and empirical evidence," IFS Working Papers W04/33, Institute for Fiscal Studies.
When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp1220. 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: (Bibliothek)
If references are entirely missing, you can add them using this form.