Demand patterns around retirement: Evidence from Spanish panel data

One of the explanations of the consumption-retirement puzzle put forward in
the literature is non-separabilities between work and consumption. In this paper we
examine demand patterns before and after retirement, using a Spanish panel data
set on household expenditures, in which we follow households across the retirement
threshold. Usually, two incidents occur simultaneously at retirement: (1) Income
falls signi…cantly and (2) leisure time increases. We provide evidence that there is
no such income fall for the retiring households in the Spanish data. This means
that what we identify with this data is the pure impact of retirement. We examine
the e¤ect of retirement on budget shares. We …nd no signi…cant e¤ect on any
commodity groups (except on medicines, which are subsidized upon retirement in
Spain), i.e. we …nd no evidence of non-separabilities between work and consumption
at retirement.