Borrowing Constraints and Consumption Behavior in Japan
Midori Wakabayashi and
Charles Horioka ()
No 11560, NBER Working Papers from National Bureau of Economic Research, Inc
In this paper, we use Japanese micro data to examine what characteristics borrowing-constrained households have and whether borrowing constraints have an important influence on household consumption behavior. We identify borrowing-constrained households using three different indicators, some of which are unique to our data source, and find that the characteristics of households that are likely to be borrowing-constrained differ depending on which of the three indicators we use. We also find that changes in current income have a positive and significant impact on changes in consumption in the case of households that are likely to be borrowing-constrained but not in the case of households that are unlikely to be borrowing-constrained. This result suggests that borrowing constraints have an important influence on household consumption behavior and that the presence of borrowing constraints is one explanation for why the life cycle-permanent income hypothesis does not hold in the real world.
JEL-codes: D12 D91 E21 O16 (search for similar items in EconPapers)
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Working Paper: Borrowing Constraints and Consumption Behavior in Japan (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:11560
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