ESRI Discussion Paper Series No.298
Does Consumption Respond to Anticipated Income Changes?
Evidence from the Start of Pension Benefit Payments in Japan

Junya Hamaaki
Graduate School of Economics, Hitotsubashi University and Visiting Research Fellow at the Economic and Social Research Institute (ESRI), Japanese Government


This paper examines whether consumption reacts to an anticipated income increase arising from the start of pension benefit payments. Using household-level data, the analysis indicates that although consumption increases significantly in the year that pension benefit payouts start, it falls back to the previous level in later years. Further analysis shows that, consistent with the presence of bounded rationality, the consumption response to the start of pension payments of households for which pension benefits account for a relatively small proportion of their disposable income is more pronounced than for households which rely on pension benefits as their major source of income.

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