An experimental test on dynamic consumption and lump-sum pensions

  1. Enrique Fatás 1
  2. Juan A. Lacomba 2
  3. Francisco Lagos 2
  4. Ana I. Moro-Egido 2
  1. 1 University of East Anglia, Norwich, UK
  2. 2 Universidad de Granada
    info

    Universidad de Granada

    Granada, España

    ROR https://ror.org/04njjy449

Journal:
SERIEs : Journal of the Spanish Economic Association

ISSN: 1869-4195

Year of publication: 2013

Volume: 4

Issue: 4

Pages: 393-413

Type: Article

DOI: 10.1007/S13209-013-0098-Y DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: SERIEs : Journal of the Spanish Economic Association

Abstract

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.

€ View funding

Funding information

We thank people from CREED (Amsterdam) for helpful comments during the elaboration of the experimental design and seminar participants at Malaga, Tucson, Granada and Rome. Financial support from the Spanish Ministry of Education and Science (SEJ2009-11117/ECON) and Junta de Andalucía (P07-SEJ-03261) is gratefully acknowledged.

Funders

Data source: Dialnet