RIEB Discussion Paper Series No.2024-16

Title

Insatiable Wealth Preference: Evidence from Japanese Household Survey

Abstract

This study theoretically considers household behavior with wealth preference and empirically investigates the validity of insatiable wealth preference using a nationally representative survey. With wealth preference, the marginal rate of substitution of asset holdings for consumption depends on the nominal interest rates of assets at each point in time. From this property, we derive a reduced-form model and estimate it to find that the marginal utility of holding financial assets remains strictly positive as asset holdings increase and has a strictly positive lower bound; that is the insatiability of wealth preference. We also show that this property plays a crucial role in creating secular demand stagnation and expanding asset price bubbles.

Keywords

Wealth preference; Survey data; Secular stagnation; Bubbles

JEL Classification

D12, E21, E43, E71

Inquiries

Mika AKESAKA
Research Institute for Economics and Business Administration (RIEB)
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Ryo MIKAMI
Faculty of Economics and Law, Shinshu University

Yoshiyasu ONO
Institute of Social and Economic Research, Osaka University
and
Faculty of Economics, Osaka University of Economics