TY  - JOUR
AU  - Laitner,John
AU  - Silverman,Dan
TI  - Estimating Life-Cycle Parameters from Consumption Behavior at Retirement
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11163
PY  - 2005
Y2  - March 2005
UR  - http://www.nber.org/papers/w11163
L1  - http://www.nber.org/papers/w11163.pdf
N1  - Author contact info:
John Laitner
Department of Economics
University of Michigan
611 Tappan Street
311 Lorch Hall
Ann Arbor, MI 48109-1220
Tel: 734/763-9620
Fax: 734/764-2769
E-Mail: jlaitner@umich.edu

Dan Silverman
Department of Economics
W.P. Carey School of Business
Arizona State University
P.O. Box 879801
Tempe, AZ 85287-9801
Tel: 480-965-4832
Fax: 480-965-3531
E-Mail: dsilver3@asu.edu
AB  - Using pseudo-panel data, we estimate the structural
parameters of a life--cycle consumption model with discrete labor
supply choice. A focus of our analysis is the abrupt drop in
consumption upon retirement for a typical household. The
literature sometimes refers to the drop, which in the U.S.
Consumer Expenditure Survey we estimate to be approximately 16%,
as the "retirement--consumption puzzle." Although a downward
step in consumption at retirement contradicts predictions from
life--cycle models with additively separable consumption and
leisure, or with continuous work-hour options, a consumption jump
is consistent with a setup having nonseparable preferences over
consumption and leisure and requiring discrete work choices. This
paper specifies a life--cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at
retirement to provide an advantageous method of identifying
structural parameters --- most importantly, the intertemporal
elasticity of substitution.
ER  -