Impact of Policy Uncertainty on Consumption and Saving Behavior: Evidence from a survey on consumers

Author Name MORIKAWA Masayuki (Vice Chairman & Vice President, RIETI)
Creation Date/NO. May 2017 17-E-075
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In Japan, uncertainty over the social security and tax system is termed as a source of stagnant household consumption at the aggregate level. This study presents empirical evidence on this issue by using original survey data of 10,000 individuals. The results indicate that individuals are highly uncertain over the future course of social security policies, and the impacts of such uncertainty on their life are perceived to be large. The policy uncertainty induces increased saving driven by a precautionary motive, and the effect is prominent for low-income individuals. These results suggest that improving long-term predictability in the social security and tax system may contribute toward stimulating household consumption.

This is the English version of the Japanese Discussion Paper (17-J-007) with some additional information and changes.

Published: Morikawa, Masayuki, 2019. "Policy uncertainty and saving attitude: Evidence from a survey on consumers," Journal of Consumer Affairs, Vol. 53(3), pp. 1297-1311