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Consumption growth and the intertemporal elasticity of substitution: some evidence from income quintile groups in Japan

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  • Shigeyuki Hamori

Abstract

This research empirically analysed the relations between the difference in consumer's preference and the consumption growth rate in Japan. As a result, the close relationship between the two is revealed. This study has clarified the fact that as the income bracket becomes higher, the value of intertemporal elasticity of substitution becomes smaller. This is consistent with the gap in the consumption growth rate between the income brackets, i.e. the difference in the consumer's preference parameter has played a significant role in correcting the consumption gap in the period of high economic growth in post-war Japan.

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  • Shigeyuki Hamori, 1996. "Consumption growth and the intertemporal elasticity of substitution: some evidence from income quintile groups in Japan," Applied Economics Letters, Taylor & Francis Journals, vol. 3(8), pages 529-532.
    • Handle: RePEc:taf:apeclt:v:3:y:1996:i:8:p:529-532
    DOI: 10.1080/135048596356177
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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Hamori, Shigeyuki, 1992. "Test of C-CAPM for Japan: 1980-1988," Economics Letters, Elsevier, vol. 38(1), pages 67-72, January.
    3. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September.
    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    5. Kocherlakota, Narayana R., 1990. "On tests of representative consumer asset pricing models," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 285-304, October.
    6. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    7. Hamori, Shigeyuki, 1993. "Test of the international equity integration of Japan," Economics Letters, Elsevier, vol. 42(1), pages 71-76.
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    Citations

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    Cited by:

    1. Hibiki Ichiue & Shusaku Nishiguchi, 2015. "Inflation Expectations And Consumer Spending At The Zero Bound: Micro Evidence," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1086-1107, April.
    2. Arai, Real & Ueda, Junji, 2013. "A numerical evaluation of the sustainable size of the primary deficit in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 59-75.
    3. repec:cty:dpaper:1504 is not listed on IDEAS
    4. Ben-Gad, Michael, 2012. "The two sector endogenous growth model: An atlas," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 706-722.
    5. Gardes, François & Merrigan, Philip, 2008. "Individual needs and social pressure: Evidence on the Easterlin hypothesis using repeated cross-section surveys of Canadian households," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 582-596, June.
    6. Biederman, Daniel K. & Goenner, Cullen F., 2008. "A life-cycle approach to the intertemporal elasticity of substitution," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 481-498, March.
    7. Kurita, Takamitsu, 2010. "Co-breaking, cointegration, and weak exogeneity: Modelling aggregate consumption in Japan," Economic Modelling, Elsevier, vol. 27(2), pages 574-584, March.
    8. Julian Thimme, 2017. "Intertemporal Substitution In Consumption: A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 226-257, February.
    9. Masaya Sakuragawa & Kaoru Hosono, 2010. "Fiscal Sustainability Of Japan: A Dynamic Stochastic General Equilibrium Approach," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 517-537, December.
    10. repec:cty:dpaper:10.1016/j.jmacro.2012.03.005 is not listed on IDEAS
    11. Ben-Gad, M., 2009. "The two sector endogenous growth model: an atlas," Working Papers 09/02, Department of Economics, City University London.
    12. Michael Ben-Gad, 2008. "The Two Sector Endogenous Growth Model and the Intertemporal Elasticity of Substitution: An Atlas," 2008 Meeting Papers 512, Society for Economic Dynamics.
    13. Masasaki Fuse, 2004. "Estimating intertemporal substitution in Japan," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 267-269.

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