Wealth Effects and the Consumption of Leisure: Retirement Decisions During the Stock Market Boom of the 1990s

By J. Coronado, Maria G. Perozek. 2003

131 citations recorded by the source corpus.

It is well accepted that households increase consumption of goods and services in response to an unexpected increase in wealth. Consensus estimates of this wealth effect are in the range of 3 to 5 cents of additional consumption spending in the long run for each additional dollar of wealth. Economic theory also suggests that consumption of leisure, like consumption of goods and services, should increase with positive shocks to wealth. In this paper, we ask whether the run-up in equity prices during the 1990s led older workers to retire earlier than they had previously planned. We identify the effect by exploiting unique data on retirement expectations from the Health and Retirement Survey. Our econometric results suggest that respondents who held corporate equity immediately prior to the bull market of the 1990s retired, on average, 7 months earlier than other respondents.

Subfields: Accounting, Demography, General Health Professions

View Paper: https://www.semanticscholar.org/paper/e5f5b64e54e68c9824fa2ef60f4b0ab3f35fa9c0

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Phillip B. Levine
2. S. Turnovsky
3. Courtney C. Coile
4. Cecilia García-Peñalosa

In Demography

1. Phillip B. Levine
2. Courtney C. Coile
3. Cecilia García-Peñalosa

In General Health Professions

1. Phillip B. Levine
2. Courtney C. Coile

Citations in the corpus

• The Effect of Inheritance Receipt on Retirement (2010, unknown): “For example, Imbens, Rubin, and Sacerdote (2001) find that lottery winners consume some of their winnings in the form of reduced labor earnings and that the effect is larger for older winners.”
• Growth and income inequality: a canonical model (2006, background): “Cheng and French (2000) and Coronado and Perozek (2003) use data from the stock market boom of the 1990s to study the effects of wealth on labor supply and retirement, finding a substantial negative effect on labor participation.”
• Bulls, Bears, and Retirement Behavior (2006, background): “Coronado and Perozek (2003) find that those who received unanticipated equity gains during the market boom of the late 1990s retired earlier than they had anticipated.”