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The Response of Household Expenditure to Anticipated Income Changes: Bonus Payments and the Seasonality of Consumption in Japan

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  • Hori Masahiro

    (Cabinet Office, Japanese Government)

  • Shimizutani Satoshi

    (Institute for International Policy Studies)

Abstract

This paper exploits a notable institutional feature of salary payments in Japan, the bonus system, to examine whether households smooth consumption under large and regular income changes. Using high quality household-level data from the Japanese Family Income and Expenditure Survey (FIES), our statistical tests show that the consumption seasonality of bonus receiving households is significantly affected by the bonus payments. Although our estimate of the marginal propensity to consume from bonus income is much smaller than that from smaller and less predictable end-of-year tax refunds, it is positive and significantly different from zero, which contrasts to earlier studies on large and regular income changes.

Suggested Citation

  • Hori Masahiro & Shimizutani Satoshi, 2009. "The Response of Household Expenditure to Anticipated Income Changes: Bonus Payments and the Seasonality of Consumption in Japan," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-22, August.
    • Handle: RePEc:bpj:bejmac:v:9:y:2009:i:1:n:34
    DOI: 10.2202/1935-1690.1908
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    References listed on IDEAS

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    Cited by:

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    2. Cameron LAPOINT & UNAYAMA Takashi, 2020. "Winners, Losers, and Near-Rationality: Heterogeneity in the MPC out of a Large Stimulus Tax Rebate," Discussion papers 20067, Research Institute of Economy, Trade and Industry (RIETI).
    3. Hori, Masahiro & Shimizutani, Satoshi, 2012. "Do households smooth expenditure over anticipated income changes? Evidence from bonus payments to public employees in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 405-433.
    4. Satoshi Shimizutani, 2017. "College tuition payment and household consumption in Japan," Review of Economics of the Household, Springer, vol. 15(1), pages 265-285, March.
    5. Sirisankanan, Aeggarchat, 2023. "The Response of Household Savings to Anticipated Income Changes: Natural Experiments Using Natural and Non-Natural Factors," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 48(2), pages 1-31, June.
    6. Hsieh, Chang-Tai & Shimizutani, Satoshi & Hori, Masahiro, 2010. "Did Japan's shopping coupon program increase spending?," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 523-529, August.

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