Does consumption decline at retirement? Evidence from repeated cross-section data for Germany

Martin Beznoska and Viktor Steiner

No 2012/14, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: 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 crosssection 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.

JEL-codes: D12 D91 H31 H55 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-age and nep-dem
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Does Consumption Decline at Retirement?: Evidence from Repeated Cross-Section Data for Germany (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:201214

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