Leisure and housing consumption after retirement: new evidence on the life-cycle hypothesis

Abstract Foreseeable income reductions around retirement should not affect aggregate consumption. However, given higher leisure endowments after retirement, theory also predicts lower consumption of substitutes. To avoid misinterpreting this predicted drop as a puzzle, our novel approach focuses on housing (complementary to in utility) and controls for changes. In Germany tenants represent roughly half all households, making many expenditures directly observable micro data. We find significant negative impacts the status consumption, which is hard reconcile with life-cycle theory. Despite lock-in nature past decisions, at have additional – though small effects housing.