Housing wealth and consumption among elderly Japanese

This paper proposes an alternative channel for elderly consumption response to housing value changes by focusing on the informal financial markets. This channel may be important, particularly in a society where the elderly are less mobile and have limited access to the formal financial markets. In such a society, elderly homeowners may leave their housing assets to their children, and in exchange receive cash to fund consumption. Japanese household-level data on the elderly are used to examine this possibility. The results indeed suggest that the consumption of the elderly responds to changes in their house values through the intrafamily finance channel alone. The marginal propensity to consume out of housing wealth is only 0.01.