Exploiting an ideal experiment situation, this paper provides clear evidence of consumption smoothing against an anticipated income change. Until FY2002, Japanese public employees received large and predictable bonus payments three times a year, but the third bonus in March was abolished in FY2003, with advance notice. Using micro data, we explore how the change in the bonus payment pattern altered the seasonality of public employees’ consumption. We find that the impact of the change in bonus patterns on consumption seasonality is negligibly small, which is consistent with the life-cycle/permanent-income hypothesis and earlier studies analyzing large and regular predictable income movements.
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| 1. Introduction------------------------------------------------------------------ |
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| 2. Bonus Payments to Public Employees and the Abolition of the March Bonus-- |
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| 3. Data description------------------------------------------------------------- |
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| 4. Changes in income and consumption patterns after 2003 -------------------- |
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| 5. Including private-sector employee households as a control group------------- |
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| 6. Summary and conclusion----------------------------------------------------- |
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| REFERENCES---------------------------------------------------------------- |
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| Table -------------------------------------------------------------------------- |
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| Appendix ----------------------------------------------------------------------- |
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| Appendix II --------------------------------------------------------------------- |
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| Appendix III -------------------------------------------------------------------- |
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