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Consumer Expenditures and Home Production at Retirement: New Evidence from Germany

Listed author(s):
  • Lührmann, Melanie

    ()

    (Sonderforschungsbereich 504)

This paper investigates consumer expenditures of German households pre- and post-retirement. The widely observed distinct drop in spending upon retirement entry poses an empirical puzzle since life cycle theory predicts smoothing of the marginal utility of consumption over time. As one explanation, I explore the role of home production as a substitute for consumer expenses. Taking a combined look at consumer expenditures and time use pre and post-retirement, I find a significant drop of about 17% of pre-retirement expenses at retirement which coincides with an increase in time spent on home production of an additional 33% per day.

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File URL: http://www.sfb504.uni-mannheim.de/publications/dp07-13.pdf
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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 07-13.

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Length: 19 pages
Date of creation: 30 Mar 2007
Handle: RePEc:xrs:sfbmaa:07-13
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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  1. Berkel, Barbara & Börsch-Supan, Axel, 2004. "Pension reform in Germany : the impact on retirement decisions," Papers 04-62, Sonderforschungsbreich 504.
  2. Mette Christensen, 2008. "Demand patterns around retirement: Evidence from Spanish panel data," The School of Economics Discussion Paper Series 0809, Economics, The University of Manchester.
  3. 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.
  4. John Laitner & Dan Silverman, 2005. "Estimating Life-Cycle Parameters from Consumption Behavior at Retirement," NBER Working Papers 11163, National Bureau of Economic Research, Inc.
  5. Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," NBER Working Papers 9586, National Bureau of Economic Research, Inc.
  6. 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.
  7. 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.
  8. Schwerdt, Guido, 2005. "Why does consumption fall at retirement? Evidence from Germany," Economics Letters, Elsevier, vol. 89(3), pages 300-305, December.
  9. Sarah Smith, 2006. "The Retirement-Consumption Puzzle and Involuntary Early Retirement: Evidence from the British Household Panel Survey," Economic Journal, Royal Economic Society, vol. 116(510), pages 130-148, 03.
  10. Raffaelle Miniaci & Chiara Monfardini & Guglielmo Weber, 2003. "Is there a retirement consumption puzzle in Italy?," IFS Working Papers W03/14, Institute for Fiscal Studies.
  11. Barbara Berkel & Axel Börsch-Supan, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 393-393, September.
  12. Michael Hurd & Susann Rohwedder, 2006. "Some Answers to The Retirement-Consumption Puzzle," Working Papers 342, RAND Corporation.
  13. Mark Aguiar & Erik Hurst, 2004. "Consumption vs. Expenditure," NBER Working Papers 10307, National Bureau of Economic Research, Inc.
  14. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-467, June.
  15. Axel Börsch-Supan & Reinhold Schnabel & Simone Kohnz & Giovanni Mastrobuoni, 2004. "Micro-Modeling of Retirement Decisions in Germany," NBER Chapters,in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 285-344 National Bureau of Economic Research, Inc.
  16. 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.
  17. Axel Börsch-Supan & Barbara Berkel, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," MEA discussion paper series 04062, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  18. Joachim Merz, 2001. "Was fehlt in der EVS ? Eine Verteilungsanalyse hoher Einkommen mit der verknüpften Einkommensteuerstatistik für Selbständige und abhängig Beschäftigte," FFB-Discussionpaper 30, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
  19. Michael Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities at Retirement," DNB Working Papers 039, Netherlands Central Bank, Research Department.
  20. Dilnot, Andrew & Disney, Richard & Johnson, Paul & Whitehouse, Edward, 1994. "Pensions policy in the UK: An economic analysis," MPRA Paper 10478, University Library of Munich, Germany.
  21. Sarah Smith (Tanner), 2004. "Can the retirement consumption puzzle be solved?," IFS Working Papers W04/07, Institute for Fiscal Studies.
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