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Did the Financial Crisis in Japan Affect Household Welfare Seriously?

Author

Listed:
  • Yasuyuki Sawada

    (Faculty of Economics, University of Tokyo)

  • Kazumitsu Nawata

    (Graduate School of Engineering, University of Tokyo)

  • Masako Ii

    (School of International and Public Policy, Hitotsubashi University)

  • Mark J. Lee

    (Department of Economics, Towson University)

Abstract

We investigate whether and how the credit crunch during the financial crisis in Japan affected household welfare. We estimate the consumption Euler equation with endogenous credit constraints using household panel data for 1993�1999, generating several findings. First, a small but non-negligible portion of the households faced credit constraints during the crisis, rejecting the standard consumption Euler equation. Second, the credit crunch affected household welfare negatively, albeit not seriously. The estimated welfare loss ranges between two to ten percent increases in marginal utility, depending on income level. Finally, our results corroborate that the credit crunch in Japan was supply-driven.

Suggested Citation

  • Yasuyuki Sawada & Kazumitsu Nawata & Masako Ii & Mark J. Lee, 2010. "Did the Financial Crisis in Japan Affect Household Welfare Seriously?," Working Papers 2010-11, Towson University, Department of Economics, revised Apr 2010.
    • Handle: RePEc:tow:wpaper:2010-11
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    File URL: http://webapps.towson.edu/cbe/economics/workingpapers/2010-11.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On the cost of financial crises
      by Economic Logician in Economic Logic on 2010-06-02 20:39:00

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    Cited by:

    1. Kuroishi, Yusuke & Sawada, Yasuyuki, 2024. "On the stability of preferences: Experimental evidence from two disasters," European Economic Review, Elsevier, vol. 161(C).
    2. Assaf Razin & Steven Rosefielde, 2011. "Currency and Financial Crises of the 1990s and 2000s," CESifo Economic Studies, CESifo Group, vol. 57(3), pages 499-530, September.
    3. Sawada, Yasuyuki & Takasaki, Yoshito, 2017. "Natural Disaster, Poverty, and Development: An Introduction," World Development, Elsevier, vol. 94(C), pages 2-15.
    4. Yasuyuki Sawada, 2017. "Disasters, Household Decisions, and Insurance Mechanisms: A Review of Evidence and a Case Study from a Developing Country in Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(1), pages 18-40, January.
    5. Roberto Alvarez & Luis Opazo, 2013. "Household Debt during the Financial Crisis: Micro-Evidence from Chile," Working Papers wp383, University of Chile, Department of Economics.
    6. Ciula, Raffaele, 2023. "Poverty and socio-financial inclusion in Japan," MPRA Paper 116760, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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