Working Paper: NBER ID: w16342
Authors: Melvin Stephens Jr; Takashi Unayama
Abstract: Japanese public pension benefits, which were distributed quarterly through February 1990 and every other month since then, induce substantial but predictable income fluctuations. The relative magnitude of the payments combined with the delay between payments yields a stronger test of the Life-Cycle/Permanent Income Hypothesis than in prior studies. Applying two identification strategies to monthly household panel data, we find that consumption significantly responds to quarterly benefit receipt. Additional analysis suggests that our findings cannot be explained by either liquidity constraints or precautionary savings motives.
Keywords: Consumption; Public Pension Benefits; Lifecycle-Permanent Income Hypothesis
JEL Codes: E21; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| public pension benefit receipt (H55) | household consumption (D10) |
| check receipt (quarterly) (H87) | nondurable consumption (E21) |
| check receipt (quarterly) (H87) | household consumption (D10) |
| bimonthly payments (J33) | consumption response (D12) |
| public pension benefit receipt (H55) | liquidity constraints (E41) |
| public pension benefit receipt (H55) | lifecycle-permanent income hypothesis (LCPIH) (D15) |