The effect of increasing retirement age on households’ savings and consumption expenditure

Stefan Etgeton, Björn Fischer-Weckemann and Han Ye

Journal of Public Economics, 2023, vol. 221, issue C

Abstract: This paper examines how households adjust their savings and consumption expenditure in response to an anticipated increase in the early retirement age (ERA). We examine the 1999 pension reform in Germany, which increased the ERA for women born after 1951 by at least three years. First, we present suggestive evidence that women update their retirement planning in response to the reform. Using the German Income and Consumption Survey, we find a negative impact on private savings of 0.6 percentage points that is driven by households with married women. We show that households consisting of highly educated women and homeowners are more likely to reduce their savings rates. Furthermore, we find that the treated households increase their leisure spending while maintaining an unchanged level of disposable income. Our findings suggest that the households anticipate experiencing a lifetime income increase and reduce their savings rate to smooth consumption.

Keywords: Pension reform; Early retirement age; Savings; Pension wealth; Consumption expenditure (search for similar items in EconPapers)
JEL-codes: D14 J14 J26 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272723000270
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Effect of Increasing Retirement Age on Households’ Savings and Consumption Expenditures (2023)
Working Paper: The Effect of Increasing Retirement Age on Households’ Savings and Consumption Expenditures (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:221:y:2023:i:c:s0047272723000270

DOI: 10.1016/j.jpubeco.2023.104845

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().