Estimating Life—Cycle Parameters from Consumption Behavior at Retirement”
John Laitner (jlaitner@umich.edu) and
Dan Silverman
Working Papers from University of Michigan, Michigan Retirement Research Center
Abstract:
Using pseudo-panel data, we estimate the structural parameters of a life—cycle consumption model with discrete labor supply choice. A focus of our analysis is the abrupt drop in consumption upon retirement for a typical household. The literature sometimes refers to the drop, which in the U.S. Consumer Expenditure Survey we estimate to be approximately 16%, as the “retirement—consumption puzzle.” Although a downward step in consumption at retirement contradicts predictions from life—cycle models with additively separable consumption and leisure, or with continuous work-hour options, a consumption jump is consistent with a setup having nonseparable preferences over consumption and leisure and requiring discrete work choices. This paper specifies a life—cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at retirement to provide an advantageous method of identifying structural parameters–most importantly, the intertemporal elasticity of substitution.
Pages: 33 pages
Date: 2005-02
New Economics Papers: this item is included in nep-lab and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (26)
Downloads: (external link)
http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp099.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp099.pdf [301 Moved Permanently]--> https://mrdrc.isr.umich.edu/publications/Papers/pdf/wp099.pdf)
Related works:
Working Paper: Estimating Life-Cycle Parameters from Consumption Behavior at Retirement (2005)
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:mrr:papers:wp099
Access Statistics for this paper
More papers in Working Papers from University of Michigan, Michigan Retirement Research Center P.O. Box 1248, Ann Arbor, MI 48104. Contact information at EDIRC.
Bibliographic data for series maintained by MRRC Administrator (mrrcumich@umich.edu).