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An empirical re-evaluation of wealth effect in Japanese household behavior |
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| Authors: | Kazuo Ogawa Shin-ichi Kitasaka Hiroshi Yamaoka Yasuharu Iwata |
| Institution: | aThe Institute of Social and Economic Research, Osaka University, 6-1 Mihogaoka, Ibaraki, Osaka 567, Japan;bGraduate School of International Cooperation Studies, Kobe University, 2-1 Rokkodai-cho, Nada-ku, Kobe 657, Japan;cThe Daiwa Bank, Ltd., 1-26-2 Nishishinjyuka, Shinjyuku-ku, Tokyo 163-05, Japan;dEconomic Research Institute, Economic Planning Agency, 3-1-1 Kasumigaseki, Chiyoda-ku, Tokyo 100, Japan |
| Abstract: | This study investigates empirically the role of wealth in the behavior of Japanese households from two standpoints. One is concerned with what types of wealth are relevant in consumption decision by households. The other is which component of consumption spending is affected by wealth. We find that the liquid financial wealth appears as a significant explanatory variable in expenditure function of many commodity groups as well as total consumption. It turns out that variations of liquid wealth are responsible for about one third of the change in aggregate consumption in the boom period starting from the middle of 1980s. |
| Keywords: | Wealth effect Life-cycle permanent income hypothesis Liquidity constraint Panel data |
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