Retirement Consumption Puzzle in China

Using data from China's Urban Household Survey and exploiting China's mandatory retirement policy, we use the regression discontinuity approach to estimate the impact of retirement on household non-durable expenditures. Retirement reduces total non-durable expenditures by about 21 percent. Among the categories of non-durable expenditures, retirement reduces the work-related expenditures and the expenditures on food consumed at home but does not has a significant effect on expenditures on entertainment. After excluding work-related expenditures, expenditures on food consumed at home and expenditures on entertainment, retirement does not have a significant effect on the remained non-durable expenditures. The findings suggest that retirement consumption puzzle might not a puzzle if an extended life-cycle model with home production is considered