AN EMPIRICAL REEVALUATION OF WEALTH EFFECT IN JAPANESE HOUSEHOLD BEHAVIOR

This study investigates empirically the role of wealth in the behavior of Japanese households from two standpoints. One is concerned with wh at types of wealth are relevant in consumption decision by households. The other is which component of consumption spending is affected by w ealth. We find that the liquid financial wealth appears as a significa nt explanatory variable in expenditure function of many commodity grou ps as well as total consumption. It turns out that variations of liqui d wealth are responsible for about one third of the change in aggregat e consumption in the boom period starting from the middle of 1980s.