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The Relationship between Retirement and Household Consumption (in Korean)

Author

Listed:
  • Jaeho Yun

    (Financial Economics Team, Economic Research Institute, The Bank of Korea)

  • Hyun-Jeong Kim

    (Macroeconomics Team, Economic Research Institute, The Bank of Korea)

Abstract

This paper studies the relationship between retirement and household consumption, both by net wealth quartiles and by consumption items, using the treatment-effect method. We employ the Korea Labor and Income Panel Study (KLIPS) data set. In particular, we investigate whether the so-called “consumption-retirement puzzle,†which means the discontinuous decrease in consumption around the time of retirement, occurs in Korea. Our analysis shows that retirement reduces household consumption by 9%. By net wealth quartiles, households in the 1st quartile (the poorest group) are most severely affected by retirement with 17% decrease in consumption after retirement. However, households in other wealthier quartiles do not experience a significant change in consumption. By consumption items, there is a significant decrease in job-related expenditure after retirement, such as car maintenance costs, clothing expenses, and public transportation expenses.

Suggested Citation

  • Jaeho Yun & Hyun-Jeong Kim, 2011. "The Relationship between Retirement and Household Consumption (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 17(1), pages 1-44, March.
    • Handle: RePEc:bok:journl:v:17:y:2011:i:1:p:1-44
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    More about this item

    Keywords

    Retirement; Household Consumption; Consumption-retirement Puzzle; Treatment Effect; the Korea Labor and Income Panel Study (KLIPS);
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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