The Life-Cycle Hypothesis Revisited: Evidence on Housing Consumption after Retirement

Miriam Beblo and Sven Schreiber

No 339, SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP)

Abstract: According to the life-cycle theory of consumption and saving, foreseeable retirement events should not reduce consumption. Whereas some consumption expenditures may fall when goods are self-produced (given higher leisure after retirement), this argument applies especially to housing consumption which can hardly be substituted by home production. We test this hypothesis using micro data for Germany (SOEP) and find that income reductions when entering retirement have a negative effect on housing expenditures for tenants. For some econometric specifications, this effect is significantly stronger than the one of income changes at other times. While this result suggests that the strict consumption-smoothing hypothesis is violated for the subgroup of non-home owners (60% in Germany), the effect is quantitatively small, which explains the ambiguity of previous findings.

Keywords: consumption smoothing; retirement-consumption puzzle; SOEP (search for similar items in EconPapers)
JEL-codes: C33 D91 E21 (search for similar items in EconPapers)
Pages: 30 p.
Date: 2010
New Economics Papers: this item is included in nep-age and nep-ure
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Citations: View citations in EconPapers (2)

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Working Paper: The Life-Cycle Hypothesis Revisited: Evidence on Housing Consumption after Retirement (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwsop:diw_sp339

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