ESRI Discussion Paper Series No.322
Do the Rich Save More in Japan?
Evidence Based on Two Micro Datasets for the 2000s

Masahiro Hori
Senior Research Fellow, Economic and Social Research Institute, Cabinet Office, Japan
Koichiro Iwamoto
Visiting Fellow, Economic and Social Research Institute, Cabinet Office, Japan
Takeshi Niizeki
Visiting Fellow, Economic and Social Research Institute, Cabinet Office, Japan
Assistant Professor, Osaka School of International Public Policy, Osaka University, Japan
Fumihiko Suga
Research Officer, Economic and Social Research Institute, Cabinet Office, Japan

Abstract

Using two household surveys for Japan, the Family and Lifestyle Survey (FLS) and the Family Income and Expenditure Survey (FIES), this paper investigates whether the saving rates of richer households (households with higher lifetime wealth) are higher than those of poorer households. The major difficulty in addressing this issue empirically is that a reliable proxy for lifetime wealth is rarely available. We therefore construct a number of proxies from the two surveys. While the estimated relationships are sensitive to the choice of proxy for lifetime wealth, the patterns observed for working age households in Japan are generally consistent with those reported for Western countries: we find significant positive correlations between saving rates and lifetime wealth when we use education and/or the type of occupation (job) as proxies, while the positive correlations disappear when we use consumption as an alternative proxy. We also try alternative proxies original to this study: lagged consumption, household assets, and/or purchase prices and find that the results with these instruments indicate marginally positive correlations between saving rates and lifetime wealth for working age households. We further find that the relationship between saving rates and lifetime wealth differs depending on the life stage of individual households. Older households with higher lifetime wealth appear to be dissaving to some extent, which is more or less consistent with the lifecycle model of consumption.

  • Keywords: saving rates, lifetime/permanent income, Japan
  • JEL classifications: D12, D91

Structure of the whole text(PDF-Format 1 File)

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  2. page1
    Abstract
  3. page2
    1. Introduction
  4. page5
    2. Data Sources
    1. page5
      Family and Lifestyle Survey (FLS)
    2. page7
      Family Income and Expenditure Survey (FIES)
  5. page8
    3. Empirical Methodology
  6. page12
    4. Results
    1. page12
      4.1 Saving Rates and Current Income
    2. page13
      4.2 Saving Rates and Permanent Income
    3. page14
      4.3 Results Based on a Variety of Instruments
      1. page14
        Instrument 1: Lagged income
      2. page15
        Instrument 2: Education and the longest-held job
      3. page16
        Instrument 3: (Nondurable) Consumption
      4. page16
        Instrument 4: Lagged consumption
      5. page17
        Instrument 5: Purchase prices
      6. page17
        Instrument 6: Assets
  7. page18
    5. Conclusion
  8. page20
    References
  9. page22
    Table 1. Regression of the subjective lifetime earnings on possible determinants
  10. page22
    Table 2. Regression of the change in lifetime earnings on the change in annual income
  11. page23
    Table 3. Summary Statistics: Saving, Income, Assets, etc.
  12. page24
    Table 4 Median Regressions of Saving Rate on Current Income Quintiles
  13. page24
    Table 5 Median Regressions of Saving Rate on Permanent Income Quintiles
  14. page25
    Table 6(a) Median Instrumental Varlable Regressions of Saving Rate on Lifetime Wealth Quintiles
  15. page25
    Table 6(b) Median Instrumental Varlable Regressions of Saving Rate on Lifetime Wealth Quintiles
  16. page26
    Table 6(c) Median Instrumental Varlable Regressions of Saving Rate on Lifetime Wealth Quintiles
  17. page26
    Table 6(d) Median Instrumental Varlable Regressions of Saving Rate on Lifetime Wealth Quintiles
  18. page27
    Table 6(e) Median Instrumental Varlable Regressions of Saving Rate on Lifetime Wealth Quintiles
  19. page28
    Appendix A. Construction of the purchase price measure
    1. page29
      Figure A.1 Distribution of the Purchase Price Measure
    2. page29
      List of 175 goods/services used to calculate the purchase price measure.
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