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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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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
Date of revision:
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. 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.
  2. M. Dolores Collado & Martín Browning, 1999. "-The Response Of Expenditures To Anticipated Income Changes: Panel Data Estimates," Working Papers. Serie AD 1999-19, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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  4. Tullio Jappelli & Luigi Pistaferri, 2010. "The Consumption Response to Income Changes," NBER Working Papers 15739, National Bureau of Economic Research, Inc.
  5. Gourinchas, P.O. & Parker, J.A., 1997. "Consumption Over the Life Cycle," Working papers 9722, Wisconsin Madison - Social Systems.
  6. Giovanni Mastrobuoni & Matthew Weinberg, 2009. "Heterogeneity in Intra-monthly Consumption Patterns, Self-Control, and Savings at Retirement," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 163-89, August.
  7. Parke E. Wilde & Christine K. Ranney, 2000. "The Monthly Food Stamp Cycle: Shooping Frequency and Food Intake Decisions in an Endogenous Switching Regression Framework," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 200-213.
  8. Martin Browning & Thomas Crossley, 2001. "The life-cycle model of consumption and saving," IFS Working Papers W01/15, Institute for Fiscal Studies.
  9. Jonathan A. Parker, 1999. "The Reaction of Household Consumption to Predictable Changes in Social Security Taxes," American Economic Review, American Economic Association, vol. 89(4), pages 959-973, September.
  10. John Ameriks & Andrew Caplin & John Leahy, 2002. "Wealth Accumulation and the Propensity to Plan," NBER Working Papers 8920, National Bureau of Economic Research, Inc.
  11. Dobkin, Carlos & Puller, Steven L., 2007. "The effects of government transfers on monthly cycles in drug abuse, hospitalization and mortality," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2137-2157, December.
  12. Jesse M. Shapiro, 2003. "Is there a Daily Discount Rate? Evidence from the Food Stamp Nutrition Cycle," Microeconomics 0304005, EconWPA, revised 21 Apr 2003.
  13. Mark Aguiar & Erik Hurst, 2004. "Consumption vs. Expenditure," NBER Working Papers 10307, National Bureau of Economic Research, Inc.
  14. Steven J. Haider & Melvin Stephens, 2007. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 247-264, May.
  15. repec:mpr:mprres:1253 is not listed on IDEAS
  16. Nicholas S. Souleles & Jonathan A. Parker & David S. Johnson, 2006. "Household Expenditure and the Income Tax Rebates of 2001," American Economic Review, American Economic Association, vol. 96(5), pages 1589-1610, December.
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