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Consumption-Income Disparity During Retirement in Ghana

Received: 14 July 2016     Accepted: 27 July 2016     Published: 30 August 2016
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Abstract

The retirement stage in the life cycle is a difficult stage if not perhaps, the most difficult stage. This is because maintaining pre-retirement consumption level is the preserve of few, though required by all. In Ghana, the inadequacy of the Social Security and National Insurance Trust pension benefit for instance, in matching up with the consumption needs of pensioners and their dependants creates a consumption-pension income disparity. This paper investigates the extent of this disparity and the reasons for the disparity. Our results show that, average consumption exceeds average pension benefit by 41%. This means that on average, a pensioner requires an additional 41% of alternative sources of retirement income to supplement his/her pension benefit. The study identifies inadequacy of the pension benefit and certain socio-economic factors to be responsible for the consumption-income disparity.

Published in International Journal of Economy, Energy and Environment (Volume 1, Issue 1)
DOI 10.11648/j.ijeee.20160101.12
Page(s) 8-15
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Consumption, Retirement, Pension Benefit, Consumption-Income Disparity

References
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[2] Bernheim, D., Skinner, J. and Weinberg, S. (2001), What Accounts for the Variation in Retirement Wealth Among U.S. Households. American Economic Review 91, 1-26.
[3] Binswanger, J., and Schunk, D. (2009), What is an adequate standard of living during retirement? CESIFO working paper no. 2893.
[4] Caglayan, E. and Astar, M. (2012), A Microeconometric Analysis of Household Consumption Expenditure Determinants for both Rural and Urban Areas in Turkey. American International Journal of Contemporary Research 2, 2.
[5] Dan, A. A., (2000), What are People Doing to Prepare for Retirement? Structural, Personal, Work, and Family Predictors of Planning. Ph. D. Dissertation. Case Western Reserve University.
[6] Daniel, W. (1999), Biostatistic: A foundation for analysis in health sciences. 7th edition. New York.
[7] Feldstein, M. (1974), Social security induced retirement and aggregate capital accumulation. Journal of Political Economy, 82 (51), 905-926.
[8] Fisher, J., D. and Marchand, J. (2011), Does the Retirement Consumption Puzzle Differ Across the Distribution? Working Paper No. 2010-20.
[9] Friedman, M. (1957), A theory of the consumption function. Princeton, N.J.: Princeton University Press, for the National Bureau of Economic Research.
[10] Gujarati, D.N. (2004), Basic Econometrics, Fourth edition, McGraw-Hill, New York.
[11] Hamermesh, D. S. (1984), Consumption during retirement: The Missing Link in the Life Cycle. The Review of Economics and Statistics. 66 (1), 1-7.
[12] Keynes, J., M. (1936), The General Theory of Employment, Interest, and Money. New York: Harcourt, Brace & Co., pp. 91-95, 107-110.
[13] Kunawotor, M. E. (2013). Consumption during retirement in Ghana: A case study of pensioners in Ghana. M.phil Thesis, University of Ghana, Legon.
[14] Kunawotor, M. E. and Adjei-Mantey, Kwame (2014). Working in Ghana after Retirement. Researchjournali’s Journal of Economics. 2 (7).
[15] Lee, H. (2001), Factors Influencing the Consumption Expenditures of Retired Elderly Households: Focused on the Factor of Wealth Components. Journal of Korean Home Economics Association English Edition 2 (1).
[16] Modigliani, F. and Brumberg, R. (1954), Utility Analysis and the Consumption Function: An Interpretation of Cross-Section Data, in Kenneth Kurihara (ed.), Post- Keynesian Economics. New Brunswick: Rutgers University Press.
[17] Neal, E. G., Schwenk, F. N., and Courtless, J. C. (1990), Apparel expenditures of older consumers. Family Economica Review 3, 12-17.
[18] Paulin, G., D. and Duly, A. L. (2002), Planning ahead: Consumer expenditure patterns in retirement. Monthly Labour Review.
[19] Pistaferri, L. (2009), The Life-Cycle Hypothesis: An Assessment of Some Recent Evidence. Stanford University, NBER, CEPR, IZA and SIEPR.
[20] Quartey, P., Kunawotor M. E. and Danquah M. (2015), Sources of retirement income among formal sector workers in Ghana. African Journal of Economics and Management studies vol 7 (3).
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  • APA Style

    Mark Edem Kunawotor. (2016). Consumption-Income Disparity During Retirement in Ghana. International Journal of Economy, Energy and Environment, 1(1), 8-15. https://doi.org/10.11648/j.ijeee.20160101.12

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    ACS Style

    Mark Edem Kunawotor. Consumption-Income Disparity During Retirement in Ghana. Int. J. Econ. Energy Environ. 2016, 1(1), 8-15. doi: 10.11648/j.ijeee.20160101.12

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    AMA Style

    Mark Edem Kunawotor. Consumption-Income Disparity During Retirement in Ghana. Int J Econ Energy Environ. 2016;1(1):8-15. doi: 10.11648/j.ijeee.20160101.12

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  • @article{10.11648/j.ijeee.20160101.12,
      author = {Mark Edem Kunawotor},
      title = {Consumption-Income Disparity During Retirement in Ghana},
      journal = {International Journal of Economy, Energy and Environment},
      volume = {1},
      number = {1},
      pages = {8-15},
      doi = {10.11648/j.ijeee.20160101.12},
      url = {https://doi.org/10.11648/j.ijeee.20160101.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijeee.20160101.12},
      abstract = {The retirement stage in the life cycle is a difficult stage if not perhaps, the most difficult stage. This is because maintaining pre-retirement consumption level is the preserve of few, though required by all. In Ghana, the inadequacy of the Social Security and National Insurance Trust pension benefit for instance, in matching up with the consumption needs of pensioners and their dependants creates a consumption-pension income disparity. This paper investigates the extent of this disparity and the reasons for the disparity. Our results show that, average consumption exceeds average pension benefit by 41%. This means that on average, a pensioner requires an additional 41% of alternative sources of retirement income to supplement his/her pension benefit. The study identifies inadequacy of the pension benefit and certain socio-economic factors to be responsible for the consumption-income disparity.},
     year = {2016}
    }
    

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    JF  - International Journal of Economy, Energy and Environment
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    AB  - The retirement stage in the life cycle is a difficult stage if not perhaps, the most difficult stage. This is because maintaining pre-retirement consumption level is the preserve of few, though required by all. In Ghana, the inadequacy of the Social Security and National Insurance Trust pension benefit for instance, in matching up with the consumption needs of pensioners and their dependants creates a consumption-pension income disparity. This paper investigates the extent of this disparity and the reasons for the disparity. Our results show that, average consumption exceeds average pension benefit by 41%. This means that on average, a pensioner requires an additional 41% of alternative sources of retirement income to supplement his/her pension benefit. The study identifies inadequacy of the pension benefit and certain socio-economic factors to be responsible for the consumption-income disparity.
    VL  - 1
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Author Information
  • Department of Finance, Zenith University College, Accra, Ghana

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