Mandatory Retirement and the Consumption Puzzle: Disentangling Price and Quantity Declines
21 Pages Posted: 28 Aug 2017
Date Written: October 2017
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: Suggested Citation