Quality and Price of Market Services and the Substitutability with Household Production: An analysis using a survey on individuals

Author Name MORIKAWA Masayuki (Vice Chairman & Vice President, RIETI)
Creation Date/NO. February 2017 17-J-006
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This study, based on an original survey on individuals, presents novel findings on the various aspects of personal services. Specifically, we study the structure of demand for services, change in the quality of services, substitution among different types of service providers, intertemporal substitution of demand for services, and substitutability between market services and household production. Consumers perceive that the quality of most market services has improved, suggesting that the true productivity growth rate of the service industries is underestimated. Price elasticity of intertemporal substitution of service demand, on average, is relatively large, which suggests a possibility of smoothing service demand through an appropriate price setting strategy. Although substitutability between market services and household service production is generally strong, we observe great heterogeneity by individual characteristics.