ESRI Discussion Paper Series No.350
Estimating Consumption Inequality in Japan over the Last Three Decades

Kazuhito Higa
Research Officer, Economic and Social Research Institute, Cabinet Office, Japan

Abstract

This study investigates consumption inequality in Japan over the last three decades using data from the Family Income and Expenditure Survey (FIES). A number of scholars have argued that the consumption data in the FIES are biased, suggesting that respondents underreport spending on rarely purchased but expensive goods and that the reporting of consumption declines over the six-month survey period due to “survey fatigue.” This study therefore controls for these possible biases and then estimates consumption inequality. When consumption inequality between the top and bottom 10 percent of the income distribution is calculated using the raw, reported consumption data in the FIES, a downward trend in consumption inequality is obtained, implying that it has become more equal than in the past. However, when controlling the measurement error in the consumption, an upward trend in consumption inequality is found, implying that inequality has been rising.


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  2. page1
    Abstract
  3. page2
    1. Introduction
  4. page4
    2. Consumption Inequality and Income Inequality
  5. page5
    3. Measurement Errors in Japanese Consumption Data
  6. page7
    4. Data
  7. page8
    5. Estimation Method
  8. page12
    6. Estimation Results
  9. page15
    7. Trends in Income, Consumption, and Estimated Consumption Inequalities
  10. page16
    8. Robustness Check A: Using Another Definition for the Consumption Variable
  11. page17
    9. Robustness Check 2: Using Only Goods Categories for Which the Elasticity is Identical for the Top and Bottom Income Groups
  12. page19
    10. Conclusion
  13. page20
    Reference
  14. page22
    Tables
    1. page22
      Table 1: Summary Statistics of Household Demographics
    2. page22
      Table 2: Summary Statistics of Annual Income in the Previous Year (in Million Yen)
    3. page23
      Table 3: Summary Statistics of Monthly Consumption of Each Goods Category (1,000 Yen)
    4. page24
      Table 4: Estimated Expenditure Elasticities for Each Goods Category
    5. page25
      Table 5: Estimated Consumption Inequality and Measurement Error
    6. page26
      Table 6: Estimated Expenditure Elasticity for Each Goods Category Using Alternative Definition of Total Consumption
    7. page27
      Table 7: Robustness Check 1: Estimated Consumption Inequality and Measurement Error
    8. page28
      Table 8: Robustness Check 2: Estimated Consumption Inequality and Measurement Error
  15. page29
    Figures
    1. page29
      Figure 1: Trends in Income Inequality, Consumption Inequality, and Estimated Consumption Inequality
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