NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Borrowing Constraints and Consumption Behavior in Japan

Midori Wakabayashi, Charles Yuji Horioka

NBER Working Paper No. 11560
Issued in August 2005
NBER Program(s):   EFG

In this paper, we use Japanese micro data to examine what characteristics borrowing-constrained households have and whether borrowing constraints have an important influence on household consumption behavior. We identify borrowing-constrained households using three different indicators, some of which are unique to our data source, and find that the characteristics of households that are likely to be borrowing-constrained differ depending on which of the three indicators we use. We also find that changes in current income have a positive and significant impact on changes in consumption in the case of households that are likely to be borrowing-constrained but not in the case of households that are unlikely to be borrowing-constrained. This result suggests that borrowing constraints have an important influence on household consumption behavior and that the presence of borrowing constraints is one explanation for why the life cycle-permanent income hypothesis does not hold in the real world.

download in pdf format
   (575 K)

email paper

This paper is available as PDF (575 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11560

Users who downloaded this paper also downloaded these:
Kohara and Horioka w12330 Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan
Wakabayashi and Horioka w12655 Is the Eldest Son Different? The Residential Choice of Siblings in Japan
Brown, Scholz, and Seshadri w14879 A New Test of Borrowing Constraints for Education
Ludvigson and Paxson t0236 Approximation Bias in Linearized Euler Equations
Carroll and Summers Consumption Growth Parallels Income Growth: Some New Evidence
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us