Retirement consumption and pension design

Kolsrud, Jonas, Landais, Camille ORCID: 0000-0002-9534-680X, Reck, Daniel ORCID: 0000-0002-5732-4706 and Spinnewijn, Johannes ORCID: 0000-0002-7963-5847 (2024) Retirement consumption and pension design. American Economic Review, 114 (1). 89 - 133. ISSN 0002-8282

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Abstract

This paper analyzes consumption to evaluate the distributional effects of pension reforms. Using Swedish administrative data, we show that on average, workers who retire earlier consume less while retired and experience larger drops in consumption around retirement. Interpreted via a theoretical model, these findings imply that reforms incentivizing later retirement incur a substantial consumption smoothing cost. Turning to other features of pension policy, we find that reforms that redistribute based on early-career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/aer
Additional Information:	© 2024 American Economic Association
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J22 - Time Allocation and Labor Supply J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J26 - Retirement; Retirement Policies
Date Deposited:	02 Jan 2024 17:39
Last Modified:	12 Dec 2024 03:59
URI:	http://eprints.lse.ac.uk/id/eprint/121131

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