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The Consumption Response to Seasonal Income: Evidence from Japanese Public Pension Benefits

  • Melvin Stephens, Jr.
  • Takashi Unayama

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.

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File URL: http://www.nber.org/papers/w16342.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16342.

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Date of creation: Sep 2010
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Publication status: published as Melvin Stephens & Takashi Unayama, 2011. "The Consumption Response to Seasonal Income: Evidence from Japanese Public Pension Benefits," American Economic Journal: Applied Economics, American Economic Association, vol. 3(4), pages 86-118, October.
Handle: RePEc:nbr:nberwo:16342
Note: ME PE
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  1. Jesse M. Shapiro, 2003. "Is there a Daily Discount Rate? Evidence from the Food Stamp Nutrition Cycle," Microeconomics 0304005, EconWPA, revised 21 Apr 2003.
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