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Marginal Propensity to Consume and the Housing Choice

June 19, 2020
Maiko Koga*1
Kohei Matsumura*2


We study the MPC heterogeneity of households in Japan both theoretically and empirically. We build a heterogeneous-agent overlapping-generations general equilibrium model with an illiquid and indivisible housing asset. We show that mortgage debtor exhibits high MPC and households about to upgrade their house exhibit low MPC. Using Japanese household survey data, we empirically support our theoretical predictions.

JEL Classification
D15, E21, E50, R21

Consumption, Heterogeneity, Housing choices, Liquidity constraints, Marginal propensity to consume

We thank Kosuke Aoki, Kazuhiro Hiraki, Ryo Jinnai, Tomohide Mineyama, Kenichi Sakura, Toshitaka Sekine, and other BOJ staff members for their comments and suggestions. We would also like to thank Wakako Kaku for excellent research assistance. The data for this analysis, Japan Household Panel Survey (JHPS/KHPS) and Survey of Households Finances were provided by the Keio University Panel Data Research Center and the Financial Public Relations Central Committee, respectively. We are grateful to them for providing us with these data. The views expressed in this paper are those of the authors and do not necessarily reflect the official views of the Bank of Japan. The research described in this paper was conducted when Maiko Koga was working at the Bank of Japan.

  1. *1School of Economics, Senshu University
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  2. *2Research and Statistics Department, Bank of Japan
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