Working Paper: NBER ID: w12330
Authors: Miki Kohara; Charles Yuji Horioka
Abstract: We use micro data on young married households from the Japanese Panel Survey of Consumers in order to analyze the importance of borrowing constraints in Japan. We find (1) that 8 to 15 percent of young married Japanese households are borrowing-constrained, (2) that household assets and the husband's educational attainment are the most important determinants of whether or not a household is borrowing-constrained, and (3) that the Euler equation implication is rejected for both the full sample and for the subsample of unconstrained households. These results suggest that the life cycle/permanent income hypothesis does not apply in Japan and that the presence of borrowing constraints is not the main reason why it does not apply.
Keywords: borrowing constraints; permanent income hypothesis; Japan; household consumption
JEL Codes: D1; D9; E2; G1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| household characteristics (R20) | borrowing constraints (F34) |
| household assets (D14) | borrowing constraints (F34) |
| husband's educational attainment (I24) | borrowing constraints (F34) |
| borrowing constraints (F34) | violation of LCPIH (K42) |
| unconstrained households (D10) | violation of LCPIH (K42) |
| expected income changes (E25) | consumption sensitivity (D12) |