Heterogeneity in Household Spending and Well-being around Retirement

63 Pages Posted: 4 Apr 2022

See all articles by Patrick Moran

Patrick Moran

University of Copenhagen

Martin O'Connell

Institute for Fiscal Studies (IFS); University of Wisconsin - Madison

Cormac O'Dea

Yale University

Francesca Parodi

University of Turin - Collegio Carlo Alberto

Michigan Retirement and Disability Research Submitter

affiliation not provided to SSRN

Date Written: September 2021

Abstract

We study heterogeneity in spending patterns around the time of retirement. Using rich consumption data from the Panel Study of Income Dynamics, and exploiting within-household spending variation, we systematically classify households into groups characterized by differences in consumption transitions at retirement. We decompose the overall spending changes into the contribution made by different subcomponents of consumption. We find that the households that increase their spending shift budget away from food and toward transportation, recreation, and trips. In contrast, those households for which spending falls reduce the budget share spent on transportation and food away from home, while increasing the share allocated to food at home and housing expenditures. Using a life-cycle model, we characterize the mechanisms capable of driving these observed patterns.

Keywords: consumption, leisure, retirement, welfare

Suggested Citation

Moran, Patrick and O'Connell, Martin and O'Dea, Cormac and Parodi, Francesca and Submitter, Michigan Retirement and Disability Research, Heterogeneity in Household Spending and Well-being around Retirement (September 2021). Available at SSRN: https://ssrn.com/abstract=4053891 or http://dx.doi.org/10.2139/ssrn.4053891

Patrick Moran

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Martin O'Connell

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

University of Wisconsin - Madison

716 Langdon Street
Madison, WI 53706-1481
United States

Francesca Parodi

University of Turin - Collegio Carlo Alberto ( email )

via Real Collegio 30
Moncalieri, Torino 10024
Italy

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