IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/102646.html
   My bibliography  Save this paper

Retirement and household expenditure in turbulent times

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/102646/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael D. Hurd & Susann Rohwedder, 2008. "The Retirement Consumption Puzzle: Actual Spending Change in Panel Data," NBER Working Papers 13929, National Bureau of Economic Research, Inc.
    2. Erich Battistin & Agar Brugiavini & Enrico Rettore & Guglielmo Weber, 2009. "The Retirement Consumption Puzzle: Evidence from a Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 99(5), pages 2209-2226, December.
    3. Hanne Preter & Dorien Looy & Dimitri Mortelmans, 2015. "Retirement Timing of Dual-Earner Couples in 11 European Countries? A Comparison of Cox and Shared Frailty Models," Journal of Family and Economic Issues, Springer, vol. 36(3), pages 396-407, September.
    4. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
    5. Symeonidis, Georgios, 2016. "The Greek pension reform strategy 2010?2016," Policy Research Working Paper Series 105821, The World Bank.
    6. Ian Tower & Gregorio Impavido, 2009. "How the Financial Crisis Affects Pensions and Insurance and Why the Impacts Matter," IMF Working Papers 2009/151, International Monetary Fund.
    7. Thomas F. Crossley & Hamish Low & Cormac O'Dea, 2013. "Household Consumption through Recent Recessions," Fiscal Studies, Institute for Fiscal Studies, vol. 34(2), pages 203-229, June.
    8. Steven J. Haider & Melvin Stephens, 2007. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 247-264, May.
    9. Michael D. Hurd, 1990. "The Joint Retirement Decision of Husbands and Wives," NBER Chapters, in: Issues in the Economics of Aging, pages 231-258, National Bureau of Economic Research, Inc.
    10. Elena Stancanelli & Arthur Van Soest, 2012. "Retirement and Home Production: A Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 102(3), pages 600-605, May.
    11. Schwerdt, Guido, 2005. "Why does consumption fall at retirement? Evidence from Germany," Economics Letters, Elsevier, vol. 89(3), pages 300-305, December.
    12. Müller, Tobias & Shaikh, Mujaheed, 2018. "Your retirement and my health behavior: Evidence on retirement externalities from a fuzzy regression discontinuity design," Journal of Health Economics, Elsevier, vol. 57(C), pages 45-59.
    13. Lundberg, Shelly & Startza, Richard & Stillman, Steven, 2003. "The retirement-consumption puzzle: a marital bargaining approach," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1199-1218, May.
    14. repec:hal:pseose:hal-01044871 is not listed on IDEAS
    15. Nicolas Moreau & Elena Stancanelli, 2015. "Household Consumption at Retirement : A Regression Discontinuity Study on French Data," Annals of Economics and Statistics, GENES, issue 117-118, pages 253-276.
    16. Michael D. Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle Anticipated and Actual Declines in Spending at Retirement," Working Papers DRU-3009, RAND Corporation.
    17. Nektarios,Milton & Tinios,Platon, 2019. "The Greek Pension Reforms : Crises and NDC Attempts Awaiting Completion," Social Protection Discussion Papers and Notes 136547, The World Bank.
    18. Peter R. Fallon & Robert E. B. Lucas, 2002. "The Impact of Financial Crises on Labor Markets, Household Incomes, and Poverty: A Review of Evidence," The World Bank Research Observer, World Bank, vol. 17(1), pages 21-45.
    19. Nicolas Moreau & Elena Stancanelli, 2015. "Household Consumption at Retirement: A Regression Discontinuity Study on French Data," PSE-Ecole d'économie de Paris (Postprint) halshs-00881215, HAL.
    20. Laliotis, Ioannis & Stavropoulou, Charitini, 2018. "Crises and mortality: Does the level of unemployment matter?," Social Science & Medicine, Elsevier, vol. 214(C), pages 99-109.
    21. Antigone Lyberaki & Platon Tinios & Thomas Georgiadis, 2010. "Multidimensional Poverty in Greece: A Deep, Persistent Grey?," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 8(1), pages 87-110.
    22. Hamermesh, Daniel S, 1984. "Life-Cycle Effects on Consumption and Retirement," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 353-370, July.
    23. Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2016. "Consumption Inequality and Family Labor Supply," American Economic Review, American Economic Association, vol. 106(2), pages 387-435, February.
    24. Kadir Atalay & Garry F. Barrett & Peter Siminski, 2019. "Pension incentives and the joint retirement of couples: evidence from two natural experiments," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(3), pages 735-767, July.
    25. Nicolas Moreau & Elena Stancanelli, 2015. "Household Consumption at Retirement : A Regression Discontinuity Study on French Data," Annals of Economics and Statistics, GENES, issue 117-118, pages 253-276.
    26. Elizabeth Ann Whitaker & Janet L. Bokemeier, 2018. "Spousal, Family and Gender Effects on Expected Retirement Age for Married Pre-retirees," Journal of Family and Economic Issues, Springer, vol. 39(3), pages 371-385, September.
    27. Hans G. Bloemen & Elena G. F. Stancanelli, 2005. "Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss," Economica, London School of Economics and Political Science, vol. 72(287), pages 431-452, August.
    28. 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.
    29. Mark Aguiar & Erik Hurst, 2013. "Deconstructing Life Cycle Expenditure," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 437-492.
    30. Aylit Romm, 2015. "The Effect of Retirement Date Expectations on Pre-retirement Wealth Accumulation: The Role of Gender and Bargaining Power in Married US Households," Journal of Family and Economic Issues, Springer, vol. 36(4), pages 593-605, December.
    31. Dolores Moreno-Herrero & Manuel Salas-Velasco & José Sánchez-Campillo, 2017. "Individual Pension Plans in Spain: How Expected Change in Future Income and Liquidity Constraints Shape the Behavior of Households," Journal of Family and Economic Issues, Springer, vol. 38(4), pages 596-613, December.
    32. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
    33. Hongbin Li & Xinzheng Shi & Binzhen Wu, 2015. "The Retirement Consumption Puzzle in China," American Economic Review, American Economic Association, vol. 105(5), pages 437-441, May.
    34. Donna Dosman & Janet Fast & Sherry Chapman & Norah Keating, 2006. "Retirement and Productive Activity in Later Life," Journal of Family and Economic Issues, Springer, vol. 27(3), pages 401-419, September.
    35. Georganas, Sotiris & Laliotis, Ioannis & Velias, Alina, 2022. "The best is yet to come: The impact of retirement on prosocial behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 589-615.
    36. Irina B. Grafova & Alan C. Monheit & Rizie Kumar, 2020. "How Do Economic Shocks Affect Family Health Care Spending Burdens?," Journal of Family and Economic Issues, Springer, vol. 41(3), pages 442-457, September.
    37. repec:wbk:hdnspu:105821 is not listed on IDEAS
    38. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-475, June.
    39. Lu Fan & Richard Stebbins & Kyoung Tae Kim, 2022. "Skint: Retirement? Financial Hardship and Retirement Planning Behaviors," Journal of Family and Economic Issues, Springer, vol. 43(2), pages 354-367, June.
    40. María José Luengo‐Prado & Almudena Sevilla, 2013. "Time to Cook: Expenditure at Retirement in Spain," Economic Journal, Royal Economic Society, vol. 123, pages 764-789, June.
    41. Yingying Dong & Dennis Tao Yang, 2017. "Mandatory Retirement And The Consumption Puzzle: Disentangling Price And Quantity Declines," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1738-1758, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Georganas, Sotiris & Laliotis, Ioannis & Velias, Alina, 2022. "The best is yet to come: The impact of retirement on prosocial behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 589-615.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Allais, Olivier & Leroy, Pascal & Mink, Julia, 2020. "Changes in food purchases at retirement in France," Food Policy, Elsevier, vol. 90(C).
    2. Jim Been & Susann Rohwedder & Michael Hurd, 2021. "Households’ joint consumption spending and home production responses to retirement in the US," Review of Economics of the Household, Springer, vol. 19(4), pages 959-985, December.
    3. Li, Hongbin & Shi, Xinzheng & Wu, Binzhen, 2016. "The retirement consumption puzzle revisited: Evidence from the mandatory retirement policy in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 623-637.
    4. Patrick Moran & Martin Orquote Connell & Cormac Orquote Dea & Francesca Parodi, 2021. "Heterogeneity in Household Spending and Well-being around Retirement," Working Papers wp427, University of Michigan, Michigan Retirement Research Center.
    5. Julia Mink, 2021. "The effects of major life events and exposure to adverse environmental conditions on health and health-related outcomes [Les effets d'événements majeurs de la vie et de l'exposition à des condition," SciencePo Working papers tel-03575191, HAL.
    6. Olafsson, Arna & Pagel, Michaela, 2024. "Retirement puzzles: New evidence from personal finances," Journal of Public Economics, Elsevier, vol. 234(C).
    7. Velarde, Melanie & Herrmann, Roland, 2014. "How retirement changes consumption and household production of food: Lessons from German time-use data," The Journal of the Economics of Ageing, Elsevier, vol. 3(C), pages 1-10.
    8. Chen, Qihui & Deng, Tinghe & Bai, Junfei & He, Xiurong, 2017. "Understanding the retirement-consumption puzzle through the lens of food consumption-fuzzy regression-discontinuity evidence from urban China," Food Policy, Elsevier, vol. 73(C), pages 45-61.
    9. Kadir Atalay & Garry Barrett, 2022. "Retirement routes and the well-being of retirees," Empirical Economics, Springer, vol. 63(5), pages 2751-2784, November.
    10. Miriam Beblo & Sven Schreiber, 2022. "Leisure and housing consumption after retirement: new evidence on the life-cycle hypothesis," Review of Economics of the Household, Springer, vol. 20(1), pages 305-330, March.
    11. Kadir Atalay & Garry F. Barrett & Anita Staneva, 2020. "The effect of retirement on home production: evidence from Australia," Review of Economics of the Household, Springer, vol. 18(1), pages 117-139, March.
    12. Christian Dudel & Julian Schmied, 2019. "Pension adequacy standards: an empirical estimation strategy and results for the United States and Germany," MPIDR Working Papers WP-2019-003, Max Planck Institute for Demographic Research, Rostock, Germany.
    13. Bonsang, Eric & van Soest, Arthur, 2020. "Time devoted to home production and retirement in couples: A panel data analysis," Labour Economics, Elsevier, vol. 65(C).
    14. Julia Mink, 2021. "The effects of major life events and exposure to adverse environmental conditions on health and health-related outcomes [Les effets d'événements majeurs de la vie et de l'exposition à des condition," SciencePo Working papers Main tel-03575191, HAL.
    15. Christian Dudel & Julian Schmied, 2023. "Pension benchmarks: empirical estimation and results for the United States and Germany," Fiscal Studies, John Wiley & Sons, vol. 44(2), pages 171-188, June.
    16. Zhu, Penghu & Lin, Boqiang, 2022. "Do the elderly consume more energy? Evidence from the retirement policy in urban China," Energy Policy, Elsevier, vol. 165(C).
    17. Stephens, Melvin & Unayama, Takashi, 2012. "The impact of retirement on household consumption in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 62-83.
    18. Cheng, Lingguo & Lu, Yunfeng, 2024. "Does retirement make people more risk averse?," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 135-155.
    19. Daniel Burkhard, 2015. "Consumption smoothing at retirement: average and quantile treatment effects in the regression discontinuity design," Diskussionsschriften dp1512, Universitaet Bern, Departement Volkswirtschaft.
    20. Margherita Borella & Flavia Coda Moscarola & Mariacristina Rossi, 2014. "(Un)expected retirement and the consumption puzzle," Empirical Economics, Springer, vol. 47(2), pages 733-751, September.

    More about this item

    Keywords

    retirement; household expenditure; crisis; Greece;
    All these keywords.

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:102646. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.