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Allocation of Expenditures in Elderly Households and the Cost of Widowhood

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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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Author information

Correspondence to Daniel Burkhard.

Additional information

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) doi: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