Mandatory Retirement and the Consumption Puzzle: Prices Decline or Quantities Decline?

Authors

Yingying Dong, University of California, Irvine
Dennis Yang, University of Virginia

Series

Upjohn Institute working paper ; 16-251

**Published Version**

In Economic Inquiry 55(4): 1738-1758

DOI

10.17848/wp16-251

Issue Date

February 2016

Abstract

This paper investigates household consumption changes at retirement by utilizing a comprehensive, diary-based household survey from China. The survey contains both consumption quantity and price information, which permits separating quantity changes from price changes. The mandatory retirement policy in China provides a quasi-experimental setting for identification of the true causal effects of fully anticipated retirement. Using regression discontinuity models, we show that food expenditure declines at retirement, particularly among the low-education group, and that the decline is driven by price declines instead of quantity declines. Shopping time for food increases at retirement, consistent with the price and quantity changes.

Sponsorship

W.E. Upjohn Institute for Employment Research Early Career Research Award 13-141-01

Subject Areas

LABOR MARKET ISSUES; Retirement and pensions