UM06-10: Home Production by Dual Earner Couples and Consumption During Retirement
The life-cycle model is economists’ primary framework for analyzing Social Security reform. First, this project would expand the life-cycle model’s framework to incorporate home-production decisions of both males and females, thereby strengthening its realism, scope, and usefulness for policy evaluation. Second, the study would estimate the model’s parameters using HRS data. Third, it would employ the model to explain the observed post-retirement decline in households’ consumption – having more time, perhaps retired households can produce more at home and purchase less in the market. The new model will enhance our understanding of how the consumption needs of working people and retirees may differ. In particular, a model with home production provides a more accurate basis for assessing the income needs of retired households. The model, and parameter estimates, can be used by policymakers to quantitatively analyze the impact of retirement on consumption needs and well-being.