Mandatory Retirement and the Consumption Puzzle: Disentangling Price and Quantity Declines

21 Pages Posted: 28 Aug 2017

See all articles by Yingying Dong

Yingying Dong

UC Irvine

Dennis Yang

University of Virginia - Darden School of Business

Date Written: October 2017

Abstract

This study investigates changes in household consumption at retirement based on a comprehensive, diary‐based household survey from China. We focus on disentangling price changes from quantity changes at retirement. The mandatory retirement policy in China provides a quasi‐experimental setting for nonparametric identification of the true causal effects of fully anticipated retirement. Using a regression discontinuity design, we find that food expenditure declines at retirement, particularly among the less‐educated group. We further show that this decline is driven by a reduction in prices rather than quantities. These findings, along with a documented increase in shopping time for food upon retirement among the less‐educated households, are consistent with a time allocation model in which education enhances the value of leisure.

JEL Classification: J26, C21

Suggested Citation

Dong, Yingying and Yang, Dennis, Mandatory Retirement and the Consumption Puzzle: Disentangling Price and Quantity Declines (October 2017). Economic Inquiry, Vol. 55, Issue 4, pp. 1738-1758, 2017, Available at SSRN: https://ssrn.com/abstract=3026757 or http://dx.doi.org/10.1111/ecin.12456

Yingying Dong (Contact Author)

UC Irvine ( email )

3151 Social Science Plaza
Irvine, CA 92617
United States

Dennis Yang

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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