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Andrea Marini

6 May 2024
In this paper I investigate the retirement-consumption puzzle in Italy for the period 2010-2016, using SHIW data. In order to address the endogeneity of the retirement decision, I estimate the effect of retirement by exploiting the exogeneity of pension eligibility in an instrumental variable approach; the IV regression is then applied in a regression discontinuity design where only households close to the eligibility point are considered. The eligibility-instrument is found to be a strong predictor of the retirement decision, and the estimated non-durable consumption drop is equal to 12.3%. When households are distinguished according to the gender of the household head, female-led households are found to undergo a consumption decline that is more than double that estimated for households with male heads. The data and the literature on the subject indicate that this large difference is likely related to the gender pay-gap that translates into a gender pension-gap. Moreover, the consumption decline appears to be concentrated in households in the lower part of the wealth distribution. Nonetheless, households in the lowest wealth quintile, do not show a significant consumption decline. The data suggests that this might be due to the impossibility for these households to further reduce their consumption at retirement, as they are mostly composed of essential expenditures.
JEL Code
E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
J26 : Labor and Demographic Economics→Demand and Supply of Labor→Retirement, Retirement Policies
C01 : Mathematical and Quantitative Methods→General→Econometrics
18 March 2024
Economic Bulletin Issue 2, 2024
This article uses comprehensive ECB survey data to examine the narrative that a general shift towards digital payments is generating a sharp divide in payments behaviours, creating a binary world of digital “haves” and analogue “have-nots”. Our analysis challenges this narrative, revealing a more complex reality of payment behaviours at the point of sale. We focus on lack of ownership of the primary tools enabling digital payments in the euro area: debit or credit cards and payment accounts. In particular, we examine the group of people who lack at least one of these tools (either a debit or credit card or a payment account), assessing their cash payment patterns and their socio-demographic profiles against the rest of the population. The findings establish that cash remains a significant part of the payments ecosystem, even among people with both cards and accounts. Additionally, we show that the group of people without either cards or accounts has a diverse demographic profile. The analysis also assesses the reasons behind not having at least one of these two tools to enable digital payments. We show that perceived physical banking presence (defined as considering it easy to reach a bank branch or an ATM) is of limited importance, suggesting that personal choice or other demand-side factors may be of greater importance. We also show the relevance of payment habits through the persistence of cash habits even after the coronavirus (COVID-19) pandemic. The results are in line with the cash and retail payments strategies of the Eurosystem, which emphasise the need for a balanced approach that accommodates both the enduring role of cash and digital innovation.
JEL Code
E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe