Why is it that consumption expenditure falls off so dramatically at retirement? Some people say it’s because the lifecycle consumption model is silly and people just don’t save enough for retirement. Spanish researchers now suggest it might be because men finally lend a hand around the house, which saves a pile of cash!
Detailed panel expenditure data from Spain reveals little evidence of a retirement consumption puzzle in 1985–2004. However, there is a drop in food at home expenditure in the later years of the sample along with evidence of households paying lower prices for the food they purchase after retirement. Our findings are consistent with a model that allows for home production as long as one accounts for the greater participation in housework by men after retirement coinciding with this latter period. Our work adds to the evidence from several countries and helps in reconciling the retirement consumption puzzle with life-cycle models.