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Allocation of Expenditures in Elderly Households and the Cost of Widowhood

Summary

Widowhood 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.

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Correspondence to Daniel Burkhard.

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The views expressed do not necessarily reflect those of CONCORDIA Versicherungen AG.

I am grateful to two anonymous referees, Aline Bütikofer, Michael Gerfin, Boris Kaiser, Kaspar Wüthrich, and seminar participants at the University of Bern for helpful suggestions and com-ments. All errors are my own. Financial support from the Swiss National Science Foundation (Grant 100018135379) is gratefully acknowledged.

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Burkhard, D. Allocation of Expenditures in Elderly Households and the Cost of Widowhood. Swiss J Economics Statistics 153, 371–401 (2017). https://doi.org/10.1007/BF03399512

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  • Jel-Classification
  • D12
  • D13
  • C30

Keywords

  • Collective household model
  • indifference scale
  • resource shares
  • economies of scale in consumption
  • Engel curves
  • elderly households