Does retirement affect alcohol expenditure? Evidence from urban Chinese older adults in 2002-2009

Abstract

Exploiting China’s mandatory retirement policy, we used fuzzy regression discontinuity design (RDD) to estimate the effect of retirement on household alcohol expenditure among urban Chinese older adults ages 50-70. Drawing on data from the Urban Household Survey (UHS) of China Statistics Bureau for the period of 2002-2009, we found that having a retired male household head significantly reduced total household expenditure on alcohol by 32%, particularly liquor. We explored two potential mechanisms that may explain the retirement effect. The first mechanism relates to decreased disposable income after retirement and the second mechanism involves reduced demand for social drinking after retirement. Our finding suggests that the urban Chinese older adults experience substantial change in drinking as a result of retirement. This has important public policy implications as China is facing a severe challenge of rapid population aging.