Consumption smoothing at retirement: average and quantile treatment effects in the regression discontinuity design

Burkhard, Daniel (November 2015). Consumption smoothing at retirement: average and quantile treatment effects in the regression discontinuity design (Discussion Papers 15-12). Bern: Department of Economics

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Standard economic models predict that individuals smooth consumption over the life cycle. In contrast, there exists controversial empirical evidence showing that consumption declines at retirement. This paper investigates whether there is evidence for this so-called Retirement Consumption Puzzle in Switzerland. Baseline regression discontinuity estimates of average treatment effects are complemented by quantile treatment effects, where all estimates take the potential endogeneity of retirement into account. The findings suggest that disposable income significantly decreases after retirement, although there is substantial treatment effect heterogeneity. The reduction in income transmits to a negative but considerably less pronounced effect on overall consumption expenditures, indicating that households simultaneously adjust their savings. The results further show that food consumption at home is not or even positively affected by retirement, whereas expenditures
in restaurants and hotels significantly decline.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Burkhard, Daniel

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

28 Dec 2020 11:01

Last Modified:

28 Dec 2020 11:01

JEL Classification:

C21, J14, J26

BORIS DOI:

10.48350/145821

URI:

https://boris.unibe.ch/id/eprint/145821

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