IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i3p1286-d487250.html
   My bibliography  Save this article

Retirement Age and Housing Consumption: The Case of South Korea

Author

Listed:
  • Chunil Kim

    (Housing Urban Finance Institute, Korea Housing and Urban Guarantee Corporation (KHUG), Busan 48400, Korea)

  • Hyobi Choi

    (Busan Development Institute, Busan 47210, Korea)

  • Yeol Choi

    (Department of Urban Planning and Engineering, Colleague of Engineering, Pusan National University, Busan 46241, Korea)

Abstract

South Korea became an aging society in 2000 and will become a super-aged nation in 2026. The extended life expectancy and earlier retirement make workers’ preparation for retirement more difficult, and that hardship might lead to poorer living conditions after retirement. As annuity payments are, in general, not enough for retirees to maintain their previous standard of living after retirement, retired households would have to liquidate their financial and real assets to cover household expenditures. As housing takes the biggest share of households’ total assets in Korea, it seems to be natural for retirees to downsize their houses. However, there is no consensus in the housing literature on housing downsizing, and the debate is still ongoing. In order to understand whether or not housing downsizing by retirees occurs in Korea, this paper examines the impact of the timing of retirement on housing consumption using an econometric model of housing tenure choice and the consumption for housing. The results show that the early retirement group living in more populated region does not downsize the house, while the timing of retirement is negatively associated with housing consumption for the late retirement group living in the peripheral region.

Suggested Citation

  • Chunil Kim & Hyobi Choi & Yeol Choi, 2021. "Retirement Age and Housing Consumption: The Case of South Korea," Sustainability, MDPI, vol. 13(3), pages 1-21, January.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:3:p:1286-:d:487250
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/3/1286/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/3/1286/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Miriam Beblo & Sven Schreiber, 2010. "The Life-Cycle Hypothesis Revisited: Evidence on Housing Consumption after Retirement," SOEPpapers on Multidisciplinary Panel Data Research 339, DIW Berlin, The German Socio-Economic Panel (SOEP).
    2. Maria Chiuri & Tullio Jappelli, 2010. "Do the elderly reduce housing equity? An international comparison," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 643-663, March.
    3. Richard Disney & Paul Johnson & Gary Stears, 1998. "Asset wealth and asset decumulation among households in the Retirement Survey," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 153-174, May.
    4. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
    5. Gorodnichenko, Yuriy & Song, Jae & Stolyarov, Dmitriy, 2013. "Macroeconomic Determinants of Retirement Timing," IZA Discussion Papers 7744, Institute of Labor Economics (IZA).
    6. Alicia H. Munnell & Steven A. Sass, 2008. "The Decline of Career Employment," Issues in Brief ib2008-8-14, Center for Retirement Research, revised Sep 2008.
    7. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2011. "What Explains Changes in Retirement Plans during the Great Recession?," American Economic Review, American Economic Association, vol. 101(3), pages 29-34, May.
    8. Coile Courtney C & Levine Phillip B, 2011. "The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-42, April.
    9. Bottazzi, Renata & Jappelli, Tullio & Padula, Mario, 2006. "Retirement expectations, pension reforms, and their impact on private wealth accumulation," Journal of Public Economics, Elsevier, vol. 90(12), pages 2187-2212, December.
    10. Thomas F. Crossley & Yuri Ostrovsky, 2003. "A Synthetic Cohort Analysis of Canadian Housing Careers," Social and Economic Dimensions of an Aging Population Research Papers 107, McMaster University.
    11. David A. Wise, 1989. "The Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise89-1, June.
    12. Steven F. Venti & David A. Wise, 2004. "Aging and Housing Equity: Another Look," NBER Chapters, in: Perspectives on the Economics of Aging, pages 127-180, National Bureau of Economic Research, Inc.
    13. John D. Benjamin & Peter Chinloy & G. Donald Jud, 2004. "Why do Households Concentrate Their Wealth in Housing?," Journal of Real Estate Research, American Real Estate Society, vol. 26(4), pages 329-344.
    14. Yogo, Motohiro, 2016. "Portfolio choice in retirement: Health risk and the demand for annuities, housing, and risky assets," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 17-34.
    15. Steven F. Venti & David A. Wise, 1989. "Aging, Moving, and Housing Wealth," NBER Chapters, in: The Economics of Aging, pages 9-54, National Bureau of Economic Research, Inc.
    16. Martin Farnham & Purvi Sevak, 2016. "Housing Wealth and Retirement Timing," CESifo Economic Studies, CESifo Group, vol. 62(1), pages 26-46.
    17. Jonathan Feinstein & Daniel McFadden, 1989. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Chapters, in: The Economics of Aging, pages 55-92, National Bureau of Economic Research, Inc.
    18. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, vol. 91(4), pages 832-857, September.
    19. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-Occupied Housing as a Hedge Against Rent Risk," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 763-789.
    20. Steven F. Venti & David A. Wise, 2000. "Aging and Housing Equity," NBER Working Papers 7882, National Bureau of Economic Research, Inc.
    21. Ying Fan & Abdullah Yavas, 2020. "How Does Mortgage Debt Affect Household Consumption? Micro Evidence from China," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(1), pages 43-88, March.
    22. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Social security, retirement age and optimal income taxation," Journal of Public Economics, Elsevier, vol. 88(11), pages 2259-2281, September.
    23. Gary S. Fields & Olivia S. Mitchell, 1984. "Retirement, Pensions, and Social Security," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262060914, December.
    24. King, Mervyn A., 1980. "An econometric model of tenure choice and demand for housing as a joint decision," Journal of Public Economics, Elsevier, vol. 14(2), pages 137-159, October.
    25. James Banks & Richard Blundell & Zoë Oldfield & James P. Smith, 2010. "Housing Price Volatility and Downsizing in Later Life," NBER Chapters, in: Research Findings in the Economics of Aging, pages 337-379, National Bureau of Economic Research, Inc.
    26. van der Klaauw, Wilbert & Wolpin, Kenneth I., 2008. "Social security and the retirement and savings behavior of low-income households," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 21-42, July.
    27. Goodman, Allen C., 1988. "An econometric model of housing price, permanent income, tenure choice, and housing demand," Journal of Urban Economics, Elsevier, vol. 23(3), pages 327-353, May.
    28. Nicole Maestas, 2010. "Expectations and Realizations of Work after Retirement," Journal of Human Resources, University of Wisconsin Press, vol. 45(3).
    29. Jones, Lawrence D., 1997. "The Tenure Transition Decision For Elderly Homeowners," Journal of Urban Economics, Elsevier, vol. 41(2), pages 243-263, March.
    30. Hamermesh, Daniel S, 1984. "Life-Cycle Effects on Consumption and Retirement," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 353-370, July.
    31. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, vol. 92(1), pages 345-362, March.
    32. Ermisch, John F. & Jenkins, Stephen P., 1999. "Retirement and housing adjustment in later life: evidence from the British Household Panel Survey," Labour Economics, Elsevier, vol. 6(2), pages 311-333, June.
    33. Hyung-Suk Choi, 2019. "A Numerical Analysis to Study Whether the Early Termination of Reverse Mortgages is Rational," Sustainability, MDPI, vol. 11(23), pages 1-10, December.
    34. Mervyn A. King, 1980. "An Econometric Model of Tenure Choice and Demand for Housing as a Joint Decision," NBER Chapters, in: Econometric Studies in Public Finance, pages 137-159, National Bureau of Economic Research, Inc.
    35. Artle, Roland & Varaiya, Pravin, 1978. "Life cycle consumption and homeownership," Journal of Economic Theory, Elsevier, vol. 18(1), pages 38-58, June.
    36. David A. Wise, 2004. "Perspectives on the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise04-1, June.
    37. Richard Disney & Anita Ratcliffe & Sarah Smith, 2015. "Booms, Busts and Retirement Timing," Economica, London School of Economics and Political Science, vol. 82(327), pages 399-419, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. SangJin Park & Chulyong Park & Joo Hyun Sung, 2022. "How Does the Involuntary Choice of Self-Employment Affect Subjective Well-Being in Small-Sized Business Workers? A Cross-Sectional Study from the Fifth Korean Working Conditions Survey," IJERPH, MDPI, vol. 19(2), pages 1-10, January.
    2. Su Jin Kang & Wonseok Seo, 2022. "Do People Determine Their Subjective Socioeconomic Status Based on the Housing Type and Residential Neighborhood? Empirical Evidence from Seoul," Land, MDPI, vol. 11(11), pages 1-22, November.
    3. Pierfrancesco De Paola & Francesco Tajani & Marco Locurcio, 2021. "Sustainable Real Estate: Management, Assessment and Innovations," Sustainability, MDPI, vol. 13(9), pages 1-6, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Murray, Tim & Dunn, Richard A., 2022. "Household production, home improvement, and housing investment among older Americans," Journal of Housing Economics, Elsevier, vol. 56(C).
    2. Disney, Richard & Henley, Andrew & Stears, Gary, 2002. "Housing costs, house price shocks and savings behaviour among older households in Britain," Regional Science and Urban Economics, Elsevier, vol. 32(5), pages 607-625, September.
    3. Bütler, Monika & Stadelmann, Sabrina, 2020. "Building on a pension: Second pillar wealth as a way to finance real estate?," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    4. Maria Chiuri & Tullio Jappelli, 2010. "Do the elderly reduce housing equity? An international comparison," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 643-663, March.
    5. Nguyen, Ha Trong & Mitrou, Francis & Zubrick, Stephen R., 2024. "Retirement, housing mobility, downsizing and neighbourhood quality - A causal investigation," Journal of Housing Economics, Elsevier, vol. 63(C).
    6. Jan Rouwendal & Marcus de Graaf, 2012. "The demand for mortgage debt, increases in house prices and the elderly home equity puzzle," ERSA conference papers ersa12p950, European Regional Science Association.
    7. Sefa Awaworyi Churchill & Siew Ling Yew & Thi Minh Thu Nguyen, 2022. "Health status and housing tenure decisions of older Australians," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(4), pages 966-989, December.
    8. Murray, Tim, 2019. "Defined benefit pensions and homeownership in the post-Great Recession era," MPRA Paper 92601, University Library of Munich, Germany.
    9. Costa-Font, Joan & Vilaplana-Prieto, Cristina, 2022. "Health shocks and housing downsizing: How persistent is ‘ageing in place’?," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 490-508.
    10. Tim Murray, 2018. "Do Potential Future Health Shocks Keep Older Americans from Using Their Housing Equity?," 2018 Papers pmu533, Job Market Papers.
    11. Sumita, Kazuto & Nakazawa, Katsuyoshi & Kawase, Akihiro, 2021. "Long-term care facilities and migration of elderly households in an aged society: Empirical analysis based on micro data," Journal of Housing Economics, Elsevier, vol. 53(C).
    12. Munnell, Alicia H. & Walters, Abigail N. & Belbase, Anek & Hou, Wenliang, 2020. "Are homeownership patterns stable enough to tap home equity?," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    13. Yogo, Motohiro, 2016. "Portfolio choice in retirement: Health risk and the demand for annuities, housing, and risky assets," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 17-34.
    14. Gary V. Engelhardt & Nadia Greenhalgh-Stanley, 2008. "Public Long-Term Care Insurance and the Housing and Living Arrangements of the Elderly: Evidence from Medicare Home Health Benefits," Working Papers, Center for Retirement Research at Boston College wp2008-15, Center for Retirement Research, revised Dec 2008.
    15. Steven F. Venti & David A. Wise, 2004. "Aging and Housing Equity: Another Look," NBER Chapters, in: Perspectives on the Economics of Aging, pages 127-180, National Bureau of Economic Research, Inc.
    16. Viola Angelini & Agar Brugiavini & Guglielmo Weber, 2014. "The dynamics of homeownership among the 50+ in Europe," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 797-823, July.
    17. Todd Sinai & Nicholas S. Souleles, 2007. "Net Worth and Housing Equity in Retirement," NBER Working Papers 13693, National Bureau of Economic Research, Inc.
    18. Agnese Romiti & Mariacristina Rossi, 2014. "Wealth decumulation, portfolio composition and financial literacy among European elderly," Carlo Alberto Notebooks 375, Collegio Carlo Alberto.
    19. Raun Ooijen & Rob Alessie & Adriaan Kalwij, 2015. "Saving Behavior and Portfolio Choice After Retirement," De Economist, Springer, vol. 163(3), pages 353-404, September.
    20. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:3:p:1286-:d:487250. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.