Yamada Tomoaki    Department   Undergraduate School  , School of Commerce    Position   Professor
Language	English
Publication Date	2009/09
Type	Academic Journal
Peer Review	Peer reviewed
Title	Nonlinear Income Variance Profile and Consumption Inequality over the Life Cycle
Contribution Type	Co-authored (other than first author)
Journal	Journal of the Japanese and International Economies
Volume, Issue, Page	23(3),pp.344-366
Author and coauthor	Naohito Abe
Details	In contrast with many other countries, consumption inequalities in Japan are not constant over household age but increase from around middle age -a fact first highlighted by Ohtake and Saito (1998). Given this, the purpose of this paper is to examine whether this phenomenon is consistent with the standard precautionary saving model developed by Carroll (1997). Specifically, we investigate: (1) the degree of age dependence of idiosyncratic income risks; and (2) the importance of age dependence for the evolution of inequalities in consumption predicted by the household model of Carroll (1997). We find a strong age dependence of income risks, which creates a nonlinear age--variance profile of income, and that the standard precautionary saving model is consistent with the observed consumption inequalities as long as we take the nonlinearity in age-variance profiles of income into account.
DOI	10.1016/j.jjie.2009.04.001