English, Article, Journal or magazine article edition: Estimating Life-Cycle Parameters from Consumption Behavior at Retirement John Laitner; Dan Silverman

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Bookmark: http://trove.nla.gov.au/version/141479
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Estimating Life-Cycle Parameters from Consumption Behavior at Retirement
Author
  • John Laitner
  • Dan Silverman
Physical Description
  • preprint
Notes
  • Using pseudo-panel data, we estimate the structural parameters of a life--cycle consumption model with discrete labor supply choice. A focus of our analysis is the abrupt drop in consumption upon retirement for a typical household. The literature sometimes refers to the drop, which in the U.S. Consumer Expenditure Survey we estimate to be approximately 16%, as the "retirement--consumption puzzle." Although a downward step in consumption at retirement contradicts predictions from life--cycle models with additively separable consumption and leisure, or with continuous work-hour options, a consumption jump is consistent with a setup having nonseparable preferences over consumption and leisure and requiring discrete work choices. This paper specifies a life--cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at retirement to provide an advantageous method of identifying structural parameters --- most importantly, the intertemporal elasticity of substitution.
  • RePEc:nbr:nberwo:11163
Language
  • English
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