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Longitudinal Study: HILDA
Title: Involuntary Retirement and the Resolution of the Retirement-Consumption Puzzle: Evidence in Australia
Authors: Barrett, G 
Brzozowski, M 
Institution: Social and Economic Dimensions of an Aging Population
Publication Date: Oct-2010
Pages: 42
Keywords: Retirement
Consumption Smoothing
Household expenditure
Abstract: A substantial body of international research has shown that household expenditure on food and non-durables signicantly 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 nd 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 nding is corroborated by an analysis of alternative measures of household well-being, including indicators of nancial hardship, and self-reported nancial 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.
Keywords: Finance; Finance -- Expenditure and constraints on expenditure
Research collection: Reports and technical papers
Appears in Collections:Reports

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