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The Relationship between Household Type and Consumption Patterns in Japan: evidence from Japan's National Survey of Family Income and Expenditure

Shinsuke Ito and Takahisa Dejima

No 712, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: The availability of non-labor income (including asset income and labor income from other household members) can reduce individuals’ willingness to work. In general, when non-labor income increases, the demand for leisure increases due to the income effect, and as a result the supply of labor decreases. Ito and Dejima (2016) examined the influence of asset and rental income on employment (i.e. individuals’ choice to work) of youths in Japan using anonymized microdata from the National Survey of Family Income and Expenditure from the years of 1989, 1994, 1999, and 2004. However, this anonymized microdata does not contain detailed information on household assets, which limited the ability to perform an in-depth analysis of employment and household assets. Ito and Dejima (2017) examined the impact of residential area and real estate prices on employment using individual data from the 2009 National Survey of Family Income and Expenditure. Results suggested a theoretical possibility that higher ownership of household assets increases the likelihood that household members choose not to work. This research also found geographic differences in the impact of real asset ownership on employment. Recently, two models for household decision-making have received attention. The Unitary Model assumes that consumption decisions are made by the household unit and with the aim of maximizing overall household utility, whereas the Collective Model assumes that consumption decisions are made through negotiations between household members where each member seeks to maximize their own utility. The Unitary Model stipulates that households’ consumption decisions are not impacted by household members’ individual incomes, as it assumes that the household unit seeks to maximize overall household utility. On the other hand, the Collective Model suggests that household members with higher incomes have increased negotiation power and therefore greater influence on household consumption decisions. The Unitary Model has not been widely adopted as a model for household consumption behavior, while for the Collective Model no strong empirical relationship between household members' individual negotiating power and household consumption decisions has been identified. This research examines the relationship between household type and consumption behavior based on individual data from the National Survey of Family Income and Expenditure in order to evaluate whether the Unitary Model or Collective Model should be adopted as the model for household consumption behavior in Japan. The use of individual data allows analysis based on a broader range of household attributes including household members' employment, household members' individual incomes, and household size and structure, and therefore enables analysis into how household members’ incomes act as proxies of their negotiating power.

Keywords: Collective Model; National Survey of Family Income and Expenditure; Household Type; Consumption Function (search for similar items in EconPapers)
JEL-codes: D12 D13 E21 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-mac and nep-upt
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