American Economic Review Vol. 114 No. 1 2024

Retirement Consumption and Pension Design

Jonas Kolsrud¹; Camille Landais²; Daniel Reck³; Johannes Spinnewijn²

¹ Department of Economics and Statistics, Linnaeus University, National Institute of Economic Research (email: ) · ² Department of Economics, London School of Economics (email: ) · ³ Department of Economics, University of Maryland (email: )

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.

DOI

10.1257/aer.20221426

Volume

114

Issue

1

Pages

89-133

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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