ESRI Discussion Paper Series No.339
Housing Wealth Effects in Japan: Evidence Based on Household Micro Data

Masahiro Hori
Senior Research Fellow, Economic and Social Research Institute, Cabinet Office, Japan
Takeshi Niizeki
Visiting Fellow, Economic and Social Research Institute, Cabinet Office, Japan
Lecturer, Faculty of Law and Letters, Ehime University


Using micro data covering almost 500,000 Japanese households over the period 1983-2012, this paper examines to what extent household consumption responds to changes in housing wealth. Instead of employing self-reported or regionally averaged values of housing wealth, we directly estimate the housing wealth of individual households by matching several official statistics, providing an ideal setting to identify housing wealth effects on consumption. Employing cross-section and pseudo-panel based regressions, we find that the marginal propensity to consume (MPC) out of housing wealth is approximately 0.0008-0.0013 for nondurable consumption and 0.0059-0.0082 for total consumption. We further find that the consumption response of older households is larger than that of younger households, which is consistent with the pure wealth effects hypothesis.

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  2. page1
  3. page2
    1 Introduction
  4. page4
    2 Related literature and data construction
    1. page4
      2.1 Literature review
    2. page5
      2.2 Data description
      1. page5
        2.2.1 Family Income and Expenditure Survey (FIES)
      2. page6
        2.2.2 Estimation of housing wealth
  5. page7
    3 Methodology
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    4 Results
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      4.1 Cross-sectional analysis
    2. page11
      4.2 Pseudo-panel analysis
    3. page14
      4.3 Further evidence: homeowners vs. renters
    4. page16
      4.4 Macroeconomic implications
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    5 Conclusion
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    1. page20
      Figure 1 Rate of change in land prices per square meter and final consumption expenditure of households (excluding imputed service of owner-occupied dwellings)
      Sources: Ministry of Land, Infrastructure, Transport and Tourism; Cabinet Office.
    2. page21
      Figure 2 Elasticity of consumption with respect to the land price per square meter
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    1. page22
      Table 1 Descriptive statistics
    2. page23
      Table 2 Regression results (cross-sectional data)
    3. page24
      Table 3 Regression results (pseudo-panel data, log-log specification)
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      Table 4 Regression results (pseudo-panel data, first-difference specification)
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      Table 5 Regression results (cross-sectional data, homeowners only)
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      Table 6 Regression results (cross-sectional data, renters only)
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      Table 7 Regression results (pseudo-panel data, log-log specification, homeowners only)
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      Table 8 Regression results (pseudo-panel data, first difference specification, homeowners only)
    9. page30
      Table 9 Contribution of changes in land prices to household consumption during 1986−1994
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