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Service Expenditure and Intertemporal Elasticity of Substitution in Japan

Author

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  • Masafumi Kozuka

    (Graduate School of Economics, Kobe University)

Abstract

In this paper, we employ a cointegration approach to empirically analyze consumer behavior related to service expenditure in Japan. The model we employ is a CRRA utility function considering service and non-durable expenditures. The ratio of service expenditure reached 50% in the 1980s in Japan, and it has been increasing. It indicates that service expenditure is an important factor in analyzing consumer behavior. The empirical results show that the intertemporal elasticity of substitution of service expenditure is positive, significant and greater than that of non-durable expenditure. These results are caused by the growing ratio of selective service expenditure.

Suggested Citation

  • Masafumi Kozuka, 2014. "Service Expenditure and Intertemporal Elasticity of Substitution in Japan," Discussion Papers 1421, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1421
    as

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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2014/1421.pdf
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    References listed on IDEAS

    as
    1. Ogaki, Masao & Reinhart, Carmen M., 1998. "Intertemporal substitution and durable goods: long-run data," Economics Letters, Elsevier, vol. 61(1), pages 85-90, October.
    2. Mankiw, N Gregory, 1985. "Consumer Durables and the Real Interest Rate," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 353-362, August.
    3. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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