TY - JOUR
T1 - The impact of the rise and collapse of Japan's housing price bubble on households’ lifetime utility
AU - Niizeki, Takeshi
AU - Suga, Fumihiko
N1 - Funding Information:
The paper was presented at the 2019 Spring Meeting of the Japanese Economic Association in Tokyo on June 6, 2019. We are grateful to Tomoaki Kotera, the discussant at the conference, for his valuable comments. We also presented the paper at the 2019 Asian Meeting of the Econometric Society and at several research meetings and seminars held in Japan. We appreciate the comments and questions received from participants of these conferences and workshops. We would also like to thank Taiyo Fukai, Junya Hamaaki, Kazuhito Higa, Masahiro Hori, Koichiro Iwamoto, Keiko Murata, and other ESRI colleagues for their support and Ralph Paprzycki for his excellent English editing service. Special thanks go to the Statistics Bureau of Japan for providing us with the microdata from the Family Income and Expenditure Survey (FIES). This work was supported by JSPS KAKENHI Grant Number 17H06925. The views expressed in this paper are those of the authors and do not represent those of the institutions to which the authors belong.
Funding Information:
The paper was presented at the 2019 Spring Meeting of the Japanese Economic Association in Tokyo on June 6, 2019. We are grateful to Tomoaki Kotera, the discussant at the conference, for his valuable comments. We also presented the paper at the 2019 Asian Meeting of the Econometric Society and at several research meetings and seminars held in Japan. We appreciate the comments and questions received from participants of these conferences and workshops. We would also like to thank Taiyo Fukai, Junya Hamaaki, Kazuhito Higa, Masahiro Hori, Koichiro Iwamoto, Keiko Murata, and other ESRI colleagues for their support and Ralph Paprzycki for his excellent English editing service. Special thanks go to the Statistics Bureau of Japan for providing us with the microdata from the Family Income and Expenditure Survey (FIES). This work was supported by JSPS KAKENHI Grant Number 17H06925. The views expressed in this paper are those of the authors and do not represent those of the institutions to which the authors belong.
Publisher Copyright:
© 2021 Elsevier Inc.
PY - 2021/6
Y1 - 2021/6
N2 - This study estimates the impact of the dramatic changes in housing prices during Japan's bubble from the late 1980s to the 1990s on households’ asset accumulation and utility over their life cycle. We construct a life-cycle model explaining households’ consumption/saving and housing decisions under collateral and borrowing constraints. We estimate this model using data from the Family Income and Expenditure Survey (FIES), which includes data on households’ housing wealth estimated from objective information. Using the estimated model, we then conduct a counterfactual simulation in which we assume that housing prices remained constant during the bubble period. Doing so allows us to quantify the gains/losses of lifetime utility due to the housing price boom and bust. We find that 72.2% of the households experienced an average decrease in lifetime utility equivalent to 5.7% of lifetime income. On average, Japan's housing price boom and bust caused a loss in lifetime utility equivalent to 4.7% of lifetime income. Moreover, we compare the impact of the housing price bubble across cohorts and find that the impact was greatest for those who experienced the bubble at ages 35–45.
AB - This study estimates the impact of the dramatic changes in housing prices during Japan's bubble from the late 1980s to the 1990s on households’ asset accumulation and utility over their life cycle. We construct a life-cycle model explaining households’ consumption/saving and housing decisions under collateral and borrowing constraints. We estimate this model using data from the Family Income and Expenditure Survey (FIES), which includes data on households’ housing wealth estimated from objective information. Using the estimated model, we then conduct a counterfactual simulation in which we assume that housing prices remained constant during the bubble period. Doing so allows us to quantify the gains/losses of lifetime utility due to the housing price boom and bust. We find that 72.2% of the households experienced an average decrease in lifetime utility equivalent to 5.7% of lifetime income. On average, Japan's housing price boom and bust caused a loss in lifetime utility equivalent to 4.7% of lifetime income. Moreover, we compare the impact of the housing price bubble across cohorts and find that the impact was greatest for those who experienced the bubble at ages 35–45.
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U2 - 10.1016/j.jjie.2021.101136
DO - 10.1016/j.jjie.2021.101136
M3 - Article
AN - SCOPUS:85107342981
VL - 60
JO - Journal of the Japanese and International Economies
JF - Journal of the Japanese and International Economies
SN - 0889-1583
M1 - 101136
ER -