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http://hdl.handle.net/2123/7697
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| Title: | Involuntary Retirement and the Resolution of the Retirement-Consumption Puzzle: Evidence from Australia |
| Authors: | Barrett, Garry F. Brzozowski, Matthew Economics |
| Keywords: | Consumption Smoothing Household Expenditure Retirement |
| Issue Date: | Sep-2010 |
| Publisher: | Department of Economics |
| Series/Report no.: | 2010-10 |
| Abstract: | A substantial body of international research has shown that household expenditure on food and non-durables significantly decreases at the time of retirement - a finding that is inconsistent with the standard life-cycle model of consumption if retirement is an anticipated event. This fall in expenditure has become known as the `retirement-consumption puzzle.' We analyze rich Australian panel data to assess the Australian evidence on the puzzle. We find strong evidence of a fall in expenditures on groceries, food consumed at home and outside meals with retirement. The observed decline in expenditure is explained by a subset of households experiencing an unanticipated wealth shock, such as a major health event or long-term job loss, at the time of retirement. This finding is corroborated by an analysis of alternative measures of household well-being, including indicators of financial hardship, and self-reported financial and life satisfaction. For the majority of households retirement is anticipated and there is no decline in economic welfare at retirement. However, for an important minority, retirement is `involuntary' and these households experience a marked decline across all indicators of economic well-being. |
| URI: | http://hdl.handle.net/2123/7697 |
| Department/Unit/Centre: | Economics |
| Appears in Collections: | Working Papers - Economics |
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