An experimental test on dynamic consumption and lump-sum pensions

Enrique Fatás ^[1] ; Juan A. Lacomba ^[2] ; Francisco Lagos ^[2] ; Ana I. Moro-Egido ^[2]
1. [1] University of East Anglia
  
  University of East Anglia
  
  Norwich District, Reino Unido
2. [2] Universidad de Granada
  
  Universidad de Granada
  
  Granada, España
Localización: SERIEs : Journal of the Spanish Economic Association, ISSN 1869-4195, Vol. 4, Nº. 4, 2013, págs. 393-413
Idioma: inglés
Enlaces
- Texto completo
Resumen
- This article examines the potential risks on consumption behavior of lump-sum payments. As a pension, lump-sum payments could be consumed too fast and generate an increase of poverty rates. We experimentally investigate consumption behavior in an inter-temporal decision-making setting. Subjects make consumption and saving decisions in an environment with two central features: first, there exists a decreasing probability of survival; and second, in addition to the regular income they get while active, they receive a unique lump-sum payment when retired. The results of this experiment show that rather than consuming too much during their income periods, subjects show a persistent precautionary saving behavior and over-save in the vast majority of periods. This result seems to be mainly driven by the risk averse individuals.