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Retirement and household expenditure in turbulent times

Author

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  • Laliotis, Ioannis
  • Shaikh, Mujaheed
  • Stavropoulou, Charitini
  • Kourouklis, Dimitrios

Abstract

We examine the impact of own and spousal retirement on household expenditure during a period of financial deterioration. We use detailed household data covering the period 2009- 2016 in Greece, during which the country experienced a severe financial crisis that affected retirees in ways that were not anticipated. Similar to Moreau and Stancanelli (2015) our empirical strategy allows for the household expenditure to depend on both own and spousal retirement status. We employ an instrumental variable identification strategy by exploiting variation coming from the early retirement age threshold. Our Two-Stage Least Squares estimates show that, even after controlling for income, total expenditure drops significantly when the husband retires and as he becomes older. The reduction is stronger in 2010, when the first wave of austerity plans, including measures affecting pensioners were announced, and after 2014 when horizontal pension cuts were implemented. Expenditure does not change significantly when the wife retires neither the older she gets. A drop-in expenditure for clothing, transport, housing and communication drives the overall reduction in expenditure. Overall, our results can have significant policy implications in the design of structural pension reforms in a period of financial hardship.

Suggested Citation

  • Laliotis, Ioannis & Shaikh, Mujaheed & Stavropoulou, Charitini & Kourouklis, Dimitrios, 2019. "Retirement and household expenditure in turbulent times," LSE Research Online Documents on Economics 102646, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:102646
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    File URL: http://eprints.lse.ac.uk/102646/
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    References listed on IDEAS

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    More about this item

    Keywords

    retirement; household expenditure; crisis; Greece;

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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