An experimental test on dynamic consumption and lump-sum pensions

Enrique Fatas (), Juan Lacomba (), Francisco Lagos and Ana Moro-Egido

SERIEs: Journal of the Spanish Economic Association, 2013, vol. 4, issue 4, 393-413

Abstract: This article examines the potential risks on consumption behavior of lump-sum payments. As a pension, lump-sum payments could be consumed too fast and generate an increase of poverty rates. We experimentally investigate consumption behavior in an inter-temporal decision-making setting. Subjects make consumption and saving decisions in an environment with two central features: first, there exists a decreasing probability of survival; and second, in addition to the regular income they get while active, they receive a unique lump-sum payment when retired. The results of this experiment show that rather than consuming too much during their income periods, subjects show a persistent precautionary saving behavior and over-save in the vast majority of periods. This result seems to be mainly driven by the risk averse individuals. Copyright The Author(s) 2013

Keywords: Experimental test; Consumption; Savings; Lump-sum payment; C91; H55; J26 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:series:v:4:y:2013:i:4:p:393-413

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DOI: 10.1007/s13209-013-0098-y

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