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Government consumption and fiscal policy: some evidence from Japan


  • Shigeyuki Hamori
  • Kazumi Asako


Japanese data from 1971 and 1995 are used to estimate the marginal rate of substitution between private consumption and government consumption, and to empirically analyse the validity of the Ricardian equivalence theorem. The marginal rate of substitution between government expenditure and private consumption is found to be higher in Japan than in studies using US data. In other words, these two types of consumption are closer substitutes in Japan than in the US. The data negate the Ricardian equivalence theorem. However, it should be noted that the perceived wealth effect is small and has a value between 0.0087 and 0.019.

Suggested Citation

  • Shigeyuki Hamori & Kazumi Asako, 1999. "Government consumption and fiscal policy: some evidence from Japan," Applied Economics Letters, Taylor & Francis Journals, vol. 6(9), pages 551-555.
  • Handle: RePEc:taf:apeclt:v:6:y:1999:i:9:p:551-555 DOI: 10.1080/135048599352583

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    References listed on IDEAS

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    1. repec:eee:japwor:v:42:y:2017:i:c:p:32-44 is not listed on IDEAS
    2. Okubo, Masakatsu, 2003. "Intratemporal substitution between private and government consumption: the case of Japan," Economics Letters, Elsevier, vol. 79(1), pages 75-81, April.
    3. Sanghamitra Bandyopadhyay & Joan Esteban, 2009. "Redistributive Taxation, Public Expenditure, and Size of Governent," UFAE and IAE Working Papers 799.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    4. Bandyopadhyay, Sanghamitra & Esteban, Joan, 2007. "Redistributive taxation and public expenditures," LSE Research Online Documents on Economics 6537, London School of Economics and Political Science, LSE Library.
    5. Kato, Ryuta Ray & Miyamoto, Hiroaki, 2013. "Fiscal stimulus and labor market dynamics in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 33-58.
    6. Ryuta Ray Kato & Hiroaki Miyamoto, 2015. "Effects of Fiscal Stimulus on the Labor Market," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 11(2), pages 277-302, March.
    7. Takeo Hori & Noritaka Maebayashi, 2013. "Indeterminacy and utility-generating government spending under balanced-budget fiscal policies," Discussion Papers in Economics and Business 13-13, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

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