An Exploration of the Changes in Consumption Expenditure of the Retired Households in South Korea

Jun, Sangmin;Kim, So-Yun

  • Received : 2013.09.24
  • Accepted : 2013.11.12
  • Published : 2013.12.30


This study analyzed the changes in household consumption expenditure of retired households using Korean panel data. We compared the pre and post retirement-consumption levels in different consumption categories using panel data. Paired t-test showed that changes in the consumption patterns before and after retirement were not significant except for the households in the third net worth quartile. Analyzing the effect of retirement on the level of household consumption expenditure, this study found that the effect of retirement was not significant in overall, although retirement had a negative effect on the level of consumption expenditure among households in the lowest net worth distribution. Understanding changes in consumption patterns of retiring households provides important information to design social security policies.


Retirement;consumption expenditure;net worth distribution;age groups;life-cycle hypothesis;retirement-consumption puzzle


  1. Ando, A., & Modigliani, F. (1963). The 'life-cycle' hypothesis of saving: aggregate implications and tests. American Economic Review, 53(1), 55–84.
  2. An, C., & Jeon, S. (2004). Empirical evidence of the interdependence of retirement and pre-and postretirement consumption. Journal of Korean Labor Economic Association, 27(3), 1-23.
  3. An, C., & Jeon, S. (2005). Measuring the optimal income replacement ratio. the Journal of the Korean Economy, 15, 5-33.
  4. Baek, H. J., Seok, S. H., Kim, H. S., & Lee, E. Y. (2012). Evaluation of preparation for retirement and adequacy of retirement income in Korea. National Pension Service: Seoul.
  5. Banks, J., Blundell, R., & Tanner, S. (1998). Is there a retirement-saving puzzle? American Economic Review, 88(4), 769-788.
  6. Bernheim, B., Douglas, J. S., & Weinberg, S. (2001). What accounts for the variation in retirement wealth among US households? American Economic Review, 91(4), 832-857.
  7. Fisher, J. D., Johnson, D. S., Marchand, J., Smeeding, T. M., & Torrey, B. B. (2008). The retirement-consumption conundrum: Evidence from a consumption survey. Economic letters, 99, 482-485.
  8. Hamermesh, D. S. (1984). Life-cycle effect on consumption and retirement. Journal of Labor Economics, 2(3), 353-370.
  9. Hira, T. K., Whitney, L. R., & Loibl, C. (2009). Determinants of retirement planning behaviour and differences by age. International Journal of Consumer Studies, 33(3), 293-301.
  10. Hurd, M. D., & Rohwedder S. (2008). The retirementconsumption puzzle: Actual spending change in panel data. NBER Working Paper, No. 13929, NBER, Cambridge, MA.
  11. Hurst, E. (2008). The retirement of a consumptionpuzzle. NBER Working Paper, No. 13789, NBER, Cambridge, MA.
  12. Malroutu, Y. L., & Brandt, J. A. (1994). Will perceived economic deficits affect housing decisions during retirement?" Journal of Consumer Studies and Home Economics, 18(4), 367-377.
  13. Mariger, R. P. (1987). A life-cycle consumption model with liquidity constraints: Theory and empirical results. Econometrica, 55(3), 533-557.
  14. Modigliani, F., & Brumberg, R. H. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In K. Kurihara (Ed.) Post-Keynesian Economics. New Brunswick, Rutgers University Press.
  15. Mullis, R. J., & Metzen, E. J. (1986). Age and wealth: A cross/within-cohort analysis." Journal of Consumer studies and home Economics, 10(3), 221-234.
  16. Nam, J., Lee, S., & Lee, S. H., & Kim, S. B. (2004). A study on the effect of aging on the household assets, consumption, and saving. Proceedings in the Seminar on the Economic Effect of Population Aging. Economic Research Institute, Seoul, South Korea.
  17. Park, S. N., & Shim, K. H. (2010). Retirement effect in the baby-boom generation. Working paper, Statistical Research Institute, Daejeon, South Korea.
  18. Smith, S., (2006). The retirement-consumption puzzle and involuntary early retirement: Evidence from the British household panel survey. The Economic Journal, 116(510), C130-C148.
  19. Statistics Korea. (2010). Consumer price index. e-National Indicators. Retrieved from
  20. Yoon, J. H., & Kim, H. J. (2010). A study on the relation of retirement and household consumption. Working paper, 417, Financial Economy Institute, Seoul, South Korea.