Abstract
SummaryWidowhood and retirement change the economie environment of elderly households. While retirement changes income and expenditure patterns, widowhood fundamentally changes the structure of the household. Besides high non-monetary cost of losing the partner, resources are no longer shared and economies of scale arising from joint consumption are lost. This paper applies a collective household model to expenditure data on elderly households in Switzerland. The findings suggest that 44% of household resources are assigned to wives and both spouses save roughly 27% or, on average, 800 Swiss Francs on monthly expenditures relative to living apart. Estimates of indifference scales indicate that men suffer a financial loss after losing their wife, while widowed women do not.
Highlights
The elderly face specific economic conditions because they are at the age of transition to retirement
This paper addresses the following questions: How are resources allocated to wives and husbands in elderly couples? How large are economies of scale of living together and do they change with retirement? What level ofexpenditures do widows or widowers need to maintain the same standard of living after the death ofthe spouse and do actual expenditures correspond to the required level? Answering these questions is important because couples by itselfcannot consume
We present the main results for the resource share and economy ofscale parameters, provides an analysis ofthe economic well-being among widows and widowers, and shows how sharing ofresources within households affects inequality among individuals
Summary
Widowhood and retirement change the economic environment of elderly households. While retirement changes income and expenditure patterns, widowhood fundamentally changes the structure of the household. Besides high non-monetary cost of losing the partner, resources are no longer shared and economies of scale arising from joint consumption are lost. This paper applies a collective household model to expenditure data on elderly households in Switzerland. The findings suggest that 44% ofhousehold resources are assigned to wives and both spouses save roughly 27% or, on average, 800 Swiss Francs on monthly expenditures relative to living apart. Estimates ofindifference scales indicate that men suffer a financial loss after losing their wife, while widowed women do not. Financial support from the Swiss National Science Foundation (Grant 100018135379) is gratefully acknowledged
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