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The role of household debt heterogeneity on consumption: Evidence from Japanese household data

Jouchi Nakajima

Economic Analysis and Policy, 2020, vol. 65, issue C, 186-197

Abstract: This paper estimates the impact of household debt on consumption behavior using data from the Japanese Preference Parameters Study. The survey features responses to forward-looking questions about key risks to income, shedding light on the motives for household savings behavior. The analysis finds that household income elasticity of consumption is significantly higher for highly-indebted Japanese households than for those with little-to-no debt, and furthermore it is only significant for negative income changes. The evidence points to a significant precautionary saving motive by Japanese households, with savers particularly concerned about unlikely future unemployment spells and longevity risks.

Keywords: Consumption; Household debt; Precautionary saving motive (search for similar items in EconPapers)
JEL-codes: D14 D81 D84 E21 G11 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:65:y:2020:i:c:p:186-197

DOI: 10.1016/j.eap.2020.01.003

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