Service Expenditure and Intertemporal Elasticity of Substitution in Japan

Masafumi Kozuka
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Masafumi Kozuka: Graduate School of Economics, Kobe University

No 1421, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: In this paper, we employ a cointegration approach to empirically analyze consumer behavior related to service expenditure in Japan. The model we employ is a CRRA utility function considering service and non-durable expenditures. The ratio of service expenditure reached 50% in the 1980s in Japan, and it has been increasing. It indicates that service expenditure is an important factor in analyzing consumer behavior. The empirical results show that the intertemporal elasticity of substitution of service expenditure is positive, significant and greater than that of non-durable expenditure. These results are caused by the growing ratio of selective service expenditure.

Keywords: Service expenditure; intertemporal elasticity of substitution; cointegration (search for similar items in EconPapers)
JEL-codes: C32 E21 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2014-05
New Economics Papers: this item is included in nep-mac and nep-upt
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