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
• DOI: 10.1007/s13209-013-0098-y
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• 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.