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Consumption and Retirement: Singapore’ Evidence Essay


In their article, Agarwal, Pan, and Qian test the way retirement affects consumption to find a solution for the so-called retirement-consumption puzzle. This puzzle describes the difference between the way retirement typically affects consumption rates (by seriously dropping them) and the smooth consumption in a standard life cycle model.

The authors review previous studies on the topic and suggest that the classical picture of the relationship between retirement and buying behaviors does not take into account the fact that people have different buying behaviors with different products. The authors believe that this idea can help to resolve the puzzle. Agarwal, Pan, and Qian try to test this opinion in their study with the use of the database of the largest bank in Singapore.

It records real transactions of Singaporean consumers that are carried out with the help of credit and debit cards or checks. The authors also use it to compare the information about the retired people to the still working ones. The authors believe that this method is better than surveys that are used in such studies as a rule: in the case of the database, no measurements are carried out, which reduces the possibility of errors. However, the authors admit that food is not always bought with a credit card, which is why they also use a survey for the grocery shopping.

Li, Shi, and Wu also point out that the theories of consumption have received the evidence that could be used to confirm and contradict them. As a result, the puzzle appeared, and the authors intend to resolve it in their work by focusing on different consumption sectors and household chores analysis. Apart from that, Li, Shi, and Wu highlight the fact that developing countries have not been studied as much as the developed ones. As a result, they carry out their research with Chinese consumers.

Their article uses the Urban Household Survey in China that offers buyer data for different parts of China. It is important that many regions of the country are characterized by different levels of economic development. The authors took this fact into account. Also, the survey allows distributing data between several areas of consumption. It was conducted by the National Bureau of Statistics in China. The authors also included the time use survey carried out by the same Bureau to gather data on the household chores. To define the retirement status, Li, Shi, and Wu focused on the types of occupation that have mandatory retirement and chose the population that was over the retirement age. Thus, the authors gathered the necessary data to test their means of resolving the consumption puzzle.


Agarwal, Pan, and Qian conclude that their study proves their hypothesis. They show that the changes in consumers behavior that are triggered by retirement are not homogenous. In particular, retired people tend to spend less money on entertainment, travel, and brand products. They also documented that retired people spend less on grocery by avoiding supermarkets and shopping at fresh markets. In general, retired people appear to buy cheaper goods, but the consumption still depends on the type of the product. The authors conclude that their work demonstrates the importance of considering different aspects of buying behavior in order to understand it.

Li, Shi, and Wu find that people who retire in China reduce their spending by 20 percent. Mostly, they stop buying work-related goods and services (traveling, for example) and begin to spend less on food. The food outcome can be explained by the household chores changes. Retired people have more spare time, which means that they can reduce food expenditures by spending more time on chores like cooking and shopping. Other nondurable goods are not affected by retirement. As a result, the authors insist that there is no riddle in post-retirement shopping if various groups of goods and different housework behaviors are considered.


Both articles are devoted to the same topic of retirement-consumption puzzle and share the same hypothesis that this puzzle can be resolved. They test the hypothesis in different ways. Agarwal, Pan, and Qian consider several aspects of spending. Li, Shi, and Wu do the same and also study the house chores as a means of money-saving for retired people. Apart from that, the articles have different data collection tools.

Agarwal, Pan, and Qian propose a more reliable tool that combines a database of actual transactions and a survey. Li, Shi, and Wu consider only surveys, but they still come from a governmental body, which makes them reliable. The sampling methods and consumption units are different as well. Agarwal, Pan, and Qian choose 180,000 customers of the largest bank in Singapore (427). Li, Shi, and Wu regard 36,974 households that had been surveyed by the Urban Household Survey (438).

As a result, it is difficult to compare the samples. Both articles discuss Asian countries, and it can be suggested that their results may be not generalizable to the entire world, but they may begin to indicate a tendency for the Asian world. Finally, both articles suggest the evidence which shows that there is no consumption puzzle and that the relationships between retirement and consumption can be logically explained. Therefore, both studies contribute to the development of the understanding of the consumption puzzle.

Works Cited

Agarwal, Sumit, Jessica Pan, and Wenlan Qian. “The Composition Effect Of Consumption Around Retirement: Evidence From Singapore †”. American Economic Review 105.5 (2015): 426-431. Print.

Li, Hongbin, Xinzheng Shi, and Binzhen Wu. “The Retirement Consumption Puzzle In China”. American Economic Review 105.5 (2015): 437-441. Print.

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"Consumption and Retirement: Singapore' Evidence." IvyPanda, 18 Oct. 2020, ivypanda.com/essays/consumption-and-retirement-singapore-evidence/.

1. IvyPanda. "Consumption and Retirement: Singapore' Evidence." October 18, 2020. https://ivypanda.com/essays/consumption-and-retirement-singapore-evidence/.


IvyPanda. "Consumption and Retirement: Singapore' Evidence." October 18, 2020. https://ivypanda.com/essays/consumption-and-retirement-singapore-evidence/.


IvyPanda. 2020. "Consumption and Retirement: Singapore' Evidence." October 18, 2020. https://ivypanda.com/essays/consumption-and-retirement-singapore-evidence/.


IvyPanda. (2020) 'Consumption and Retirement: Singapore' Evidence'. 18 October.

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