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Consumption Patterns around the Time of Retirement: Evidence from the Consumer Expenditure Surveys

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  • Aydogan Ulker

Abstract

This study,using the Consumer Expenditure Surveys from 1984 through 1998, revisits the widely pronounced retirement-savings puzzle, which claims the existence of a sharp drop in consumption at the time of retirement. In contrast to previous work, I find that consumption of the retired households is consistent with the smoothing behavior implied by the conventional permanent income/life-cycle models. The results present evidence that the elderly actually do not reduce their standard of living around the time of retirement due to a shortage in savings or some other reasons. While the evidence does not favor a dramatic drop in consumption, the composition of consumption changes significantly as households move into the retirement period. The difference between the results of this study and those of the previous work is mainly driven by the fact that I use a comprehensive measure of consumption that includes not only nondurables and services but also service flows from housing and durables. Moreover, using detailed information on the prices faced by the households yields a more accurate measure of household consumption

Suggested Citation

  • Aydogan Ulker, 2004. "Consumption Patterns around the Time of Retirement: Evidence from the Consumer Expenditure Surveys," Econometric Society 2004 Australasian Meetings 54, Econometric Society.
  • Handle: RePEc:ecm:ausm04:54
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    File URL: http://repec.org/esAUSM04/up.3810.1076289918.pdf
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    References listed on IDEAS

    as
    1. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, pages 769-788.
    2. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
    3. Hamermesh, Daniel S, 1984. "Consumption during Retirement: The Missing Link in the Life Cycle," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 1-7, February.
    4. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, vol. 91(4), pages 832-857, September.
    5. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    6. Kotlikoff, Laurence J & Spivak, Avia & Summers, Lawrence H, 1982. "The Adequacy of Savings," American Economic Review, American Economic Association, vol. 72(5), pages 1056-1069, December.
    7. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
    8. A. L. Robb & J. B. Burbidge, 1989. "Consumption, Income, and Retirement," Canadian Journal of Economics, Canadian Economics Association, vol. 22(3), pages 522-542, August.
    9. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-730, May.
    10. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
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    More about this item

    Keywords

    Consumption; Well-being of the Elderly; Retirement;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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