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Table 1. Summary Statistics

All	October-March, November-April, and December-May Panels (Used for Browning and Collardo graphical analysis)	July-December, August-January, September-February, October-March, November-April, and December-May Panels
Non-Bonus Group	December Bonus Group	December & March Bonus Group
Number of Households x Months	26,322	4716	14,654	6,952	36,215
Number of Households	4,398	788	2,447	1,163	9,094
Monthly Average Income (in the previous year)	626,396	622,693	629,337	622,710	628,778
(231,794)	)	(260,167)	)	(236,196)	)	(199,731)	)	(235,268)	)
Household Head
Regular Monthly Income	425,992	368,443	434,272	447,578	430,042
(182,526)	)	(241,131)	)	(173,673)	)	(142,386)	)	(185,636)	)
Bonus Income (December)	868,868	0	1,064,979	1,045,317	874,592
(615,076)	)	(0)	)	(569,273)	)	(353,273)	)	(624,882)	)
Bonus Income (March)	59,724	0	0	226,105	N.A.
(116,348)	)	(0)	)	(0)	)	(116,744)	)	(N.A.	)
End-of-Year Adjustment (December)	18,202	16,222	18,713	18,440	20,286
(47,092)	)	(47,184)	)	(48,159)	)	(44,700)	)	(43,886)	)
Consumption
Total Monthly Consumption	304,768	273,375	305,574	324,364	304,061
(230,900)	)	(213,601)	)	(230,225)	)	(241,141)	)	(233,962)	)
Durables	22,872	14,774	22,497	29,156	22,195
(140,176)	)	(99,808)	)	(143,279)	)	(155,845)	)	(139,322)	)
Semi-durables	42,573	36,278	42,326	47,361	43,206
(52,104)	)	(47,466)	)	(52,794)	)	(53,163)	)	(52,167)	)
Non-durables	118,896	113,767	118,188	123,867	119,421
(46,136)	)	(49,041)	)	(44,623)	)	(46,769)	)	(48,079)	)
Services	120,427	108,555	122,563	123,980	119,239
(131,371)	)	(139,578)	)	(129,652)	)	(128,775)	)	(136,122)	)
Household Head Age	41.86	43.57	41.21	42.08	41.92
(8.91)	)	(9.48)	)	(8.64)	)	(8.91)	)	(8.96)	)
Family Size	3.63	3.51	3.68	3.61	3.60
(1.10)	)	(1.12)	)	(1.09)	)	(1.10)	)	(1.10)	)

Note: Bonus income is paid in addition to regular monthly income in both December and March.
Table 2. Response of Consumption to December Bonus Income and End-of-Year Tax Adjustments

Model I	Model II
Total excluding Durables	Semi-Durable Consumption	Non-Durable Consumption	Service Consumption	Total excluding Durables	Semi-Durable Consumption	Non-Durable Consumption	Service Consumption
Ratio of Bonus Income to Monthly Average Income
α0
Contemporaneous	0.047 ***	0.074 ***	0.020 ***	0.062 ***	0.048 ***	0.078 ***	0.019 ***	0.057 ***
(Std. Error)	( 0.006 )	( 0.019 )	( 0.005 )	( 0.010 )	( 0.006 )	( 0.020 )	( 0.005 )	( 0.011 )
α1
Once Lagged	-0.037 ***	-0.057 ***	-0.008	-0.047 ***	-0.038 ***	-0.057 ***	-0.006	-0.051 ***
(Std. Error)	( 0.006 )	( 0.020 )	( 0.005 )	( 0.012 )	( 0.007 )	( 0.021 )	( 0.005 )	( 0.012 )
α2
Twice Lagged	-0.008	-0.033	-0.011 ***	0.009	-0.004	-0.038	-0.006	0.015
(Std. Error)	( 0.006 )	( 0.022 )	( 0.004 )	( 0.012 )	( 0.006 )	( 0.024 )	( 0.005 )	( 0.012 )
Ratio of End-of-Year Adjustments to Monthly Average Income
β0
Contemporaneous	0.091	0.087	0.010	0.191 *
(Std. Error)	( 0.065 )	( 0.190 )	( 0.053 )	( 0.114 )
β1
Once Lagged	-0.053	-0.076	0.000	-0.177
(Std. Error)	( 0.076 )	( 0.235 )	( 0.058 )	( 0.125 )
β2
Twice Lagged	-0.090	-0.081	-0.088 *	0.045
(Std. Error)	( 0.071 )	( 0.261 )	( 0.048 )	( 0.117 )
Number of observations	18,044	17,691	18,044	18,033	17,030	16,701	17,030	17,021
R-squared	0.263	0.129	0.439	0.042	0.267	0.129	0.443	0.044
Root MSE	0.399	1.274	0.294	0.704	0.397	1.275	0.292	0.696

Notes: The sample include all available spending growth observations in Nov.-Dec., Dec.-Jan., and Jan.-Feb. (white-collar, large firm or government employees, and less than 65 household head observations only) from 1990 to 1999. The dependent variables are $ \log(\text{Ct/Ct-1}) $ , and all Cs are in real terms. All regressions were conducted using OLS and include short-term interest rate, the age and the squared age of the household head, changes in the number of family members, and month dummies. Numbers in the parentheses below coefficients are robust standard errors.

***, **, and * that are attached to the estimated coefficients or F-statistics indicate estimates are statistically significant at the 1 percent level, 5 percent level, and 10 percent level, respectively.
Table 3. Response of Consumption (excluding Durables) to December Bonus Income by Asset Levels

Asset/Income > Median	Asset/Income <= Median	Asset / Income > 25th centile	Asset / Income <= 25th centile
α0
Coef. On Bonus/Income(t)	0.030 ***	0.063 ***	0.038 ***	0.062 ***
Std. Error	( 0.011 )	( 0.012 )	( 0.009 )	( 0.017 )
α1
Coef. On Bonus/Income(t-1)	-0.022 **	-0.051 ***	-0.027 ***	-0.057 ***
Std. Error	( 0.011 )	( 0.013 )	( 0.009 )	( 0.019 )
α2
Coef. On Bonus/Income(t-2)	-0.004	0.000	-0.007	0.012
Std. Error	( 0.013 )	( 0.016 )	( 0.011 )	( 0.021 )
F-stat: Σαj=0 (j=0,1,2)	0.080	0.570	0.130	0.670
Number of observations	4,327	4,328	6,494	2,161
R-squared	0.264	0.284	0.275	0.264
Root MSE	0.426	0.380	0.411	0.380

Notes: The sample consists of the August-January and September-February panels of the FIES and FSS from 1990 to 1999. Asset/Income is the ratio of gross assets to annual pre-tax income. Regression specification is the same as that of Model I in Table 2. Numbers in parentheses are robust standard errors. $ ^{***} $ , $ ^{**} $ , and $ ^{*} $ attached to the coefficients indicate that coefficients are statistically significant at the 1 percent level, 5 percent level, and 10 percent level, respectively. The number of observations in this table is smaller than that used in Table 2, as the asset data is not always available.
Table 4. Quarterly Response of Consumption to December Bonus, 1990-1999

dlog(Consumption excluding Durables)
All Observations (1)	With Bonus Observations Only (2)	All Observations with Dummy Variables
(2)	(3)	(4)
December Bonus / Quarterly Income Ratio	0.107 ***	0.073 *	0.076 *
( 0.025 )	( 0.037 )	( 0.045 )
Small Bonus Dummy interacted with the December Bonus / Quarterly	0.144
( 0.096 )
Large Bonus Dummy interacted with the December Bonus / Quarterly	0.098 *
( 0.053 )
No Bonus Receipt Dummy	-0.0273	-0.010
( 0.032 )	( 0.038 )
Number of observations	1,528	1,238	1,528	1,528

Notes: Dependent variable is quarterly growth of consumption (excluding durables) from the sum of September, October, and November to that of December, January, and February.

All regressions are ordinary least squares (OLS) and include a quadratic in age, changes in the number of family members, and year dummies. Numbers in parentheses are robust standard errors.

*** and * indicate statistically significant at the 1 percent level and 10 percent level, respectively.
Figure 1. Seasonal Pattern of Household Head Monthly Income by Group

Source: Authors' calculation based on the FIES data from 1990 to 1999.

Notes: Average monthly changes in log nominal income for the three groups: No-Bonus, December Bonus, and December & March Bonus. The number of observations for each group is reported in Table 1.
Figure 2. Seasonal Pattern of Monthly Consumption by Group

Notes: See Appendix Table 2 for data, specification and the detailed results.
## Appendix: Categories of spending items

The classification of spending categories in this study follows that used by the Ministry of Internal Affairs and Communications in the published tabulations of this survey (“Annual report on the Family Income and Expenditure Survey”). Durables include household durables, automobiles, communication equipment, and recreational durable goods. Semi-durables include clothing, footwear, sporting goods, video games, computer hardware and software, and books. Non-durables include food (except eating out), fuel, light, and water charges, medicines, films, plants and gardening goods, and tobacco. Services include eating out, rents for housing, medical expenses, public transportation, communication (except communication equipment), education (except school textbooks and reference books), recreational services and personal care services.
Appendix Table 1. Share of Bonus Receivers, Average Ratio of Bonus Receipts to Monthly Regular Income, and Average Monthly Income by Type of Workers

December Observations (from 1990 to 1999)	March Observations (from 1990 to 1999)
Private Firms with fewer than 100 workers	Private Firms with 100 workers or more	Governments	Total	Private Firms with fewer than 100 workers	Private Firms with 100 workers or more	Governments	Total
White-collar workers	Number of Observations	3,944	6,154	3,083	13,181	4,058	6,393	3,223	13,674
Share of Bonus Receivers (%)	64.3	77.5	87.9	76.0	6.5	6.1	67.9	20.8
Ratio of Bonus to Regular Income	1.88	2.36	2.34	2.23	0.74	0.72	0.48	0.54
Monthly Income (in yen)	524,160	637,630	613,648	598,069	519,705	631,964	616,182	594,929
Blue-collar workers & service industry workers	Number of Observations	2,677	1,717	115	4,509	2,797	1,856	122	4,775
Share of Bonus Receivers (%)	53.4	72.4	76.5	61.2	1.6	2.4	46.7	3.1
Ratio of Bonus to Regular Income	1.30	1.89	2.32	1.60	0.55	0.61	0.50	0.55
Monthly Income (in yen)	379,374	458,603	461,681	411,643	375,952	451,334	448,443	407,105
Total	Number of Observations	6,621	7,871	3,198	17,690	6,855	8,249	3,345	18,449
Share of Bonus Receivers (%)	59.9	76.4	87.5	72.2	4.5	5.2	67.1	16.2
Ratio of Bonus to Regular Income	1.67	2.26	2.34	2.09	0.71	0.71	0.48	0.54
Monthly Income (in yen)	465,620	598,577	608,183	550,551	461,050	591,322	610,064	546,316

Notes: The numbers for "December Observations" are calculated using the panels that cover December observations (i.e., from July-December panel to December-May panel). The numbers for "March Observations" are calculated using the panels that cover March observations (i.e., from October-March panel to March-August panel). The average ratio of bonus to regular income refers to the average among the bonus receivers (not among the total workers including those without bonus).
Appendix Table 2. Effects of the Bonus Payments on the Seasonal Pattern of Consumption

Total Consumption excluding Durable Goods	Semi-Durable Consumption	Non-Durable Consumption	Service Consumption
Coef.	Std. Err.	Coef.	Std. Err.	Coef.	Std. Err.	Coef.	Std. Err.	Coef.	Std. Err.
December Bonus Dummy	November	b11	-0.018	( 0.032 )	-0.065	( 0.093 )	-0.009	( 0.018 )	-0.044	( 0.056 )
December	b12	0.091	*** ( 0.021 )	0.227	*** ( 0.064 )	0.024	( 0.016 )	0.134	*** ( 0.039 )
January	b1	-0.055	*** ( 0.016 )	-0.053	( 0.053 )	-0.013	( 0.014 )	-0.121	*** ( 0.032 )
February	b2	-0.012	( 0.017 )	-0.110	* ( 0.060 )	-0.008	( 0.012 )	0.018	( 0.032 )
March	b3	-0.003	( 0.017 )	-0.050	( 0.058 )	-0.006	( 0.010 )	-0.016	( 0.032 )
April	b4	0.011	( 0.020 )	0.011	( 0.063 )	-0.002	( 0.012 )	0.065	* ( 0.039 )
May	b5	-0.040	( 0.028 )	-0.028	( 0.087 )	-0.005	( 0.018 )	-0.043	( 0.055 )
December & March Bonus Dummy	November	c11	-0.014	( 0.035 )	-0.004	( 0.104 )	0.021	( 0.021 )	-0.034	( 0.060 )
December	c12	0.185	*** ( 0.023 )	0.347	*** ( 0.070 )	0.085	*** ( 0.018 )	0.251	*** ( 0.042 )
January	c1	-0.100	*** ( 0.019 )	-0.110	* ( 0.058 )	-0.054	*** ( 0.015 )	-0.175	*** ( 0.035 )
February	c2	-0.016	( 0.019 )	-0.091	( 0.066 )	-0.010	( 0.013 )	0.023	( 0.035 )
March	c3	0.061	*** ( 0.019 )	0.065	( 0.065 )	0.016	( 0.012 )	0.078	** ( 0.035 )
April	c4	-0.005	( 0.023 )	-0.062	( 0.071 )	0.012	( 0.014 )	0.014	( 0.043 )
May	c5	-0.088	*** ( 0.031 )	-0.061	( 0.097 )	-0.028	( 0.020 )	-0.122	** ( 0.061 )
F-statistics
(a) All December Dummies (bS)=0(b) All Dec. & March Dummies (cS)=0(a)+(b) All bS and cS are zero.(c) All Dec. Dummies (bS)=
All Dec. & March Dummies (cS)
Number of observations
R-squared
Root MSE

Notes: October-March, November-April, and December-May panels are pooled. The dependent variable is $ \log(\text{Ct/Ct-1}) $ , and all Cs are in nominal terms. All regressions were conducted using OLS and include monthly dummies, nominal interest rate, change in the price of consumption goods, and change in the number of family members as additional regressors. Numbers in parentheses are robust standard errors. $ *\*\* $ , $ *\* $ , and $ * $ attached to the estimated coefficients and F-statistics indicate those are statistically significant at 1 percent level, 5 percent level, and 10 percent level, respectively.
Chapter II:

Did Japan’s Shopping Coupon Program Increase Spending? $ ^{*} $

## Abstract

In March 1999, 31 million “shopping coupons” worth 20,000 yen each were distributed to Japanese families with children and to the elderly. The coupons expired after six months and could only be used within the recipient’s local community. We use variation in the number of children across families and in the number of recipients across prefectures to measure the effect of the coupons on spending. We find that coupons had a positive effect on spending on semi-durables, but no effect on spending on nondurables or services. The marginal propensity to consume on semi-durables was 0.3-0.4 when the coupons were distributed in March. There is no evidence of a reversal in spending after the coupons had been used.
### 1. Introduction

In the spring of 1999 the Japanese government distributed shopping coupons worth 20,000 yen (about 200 dollars) to families with children under the age of 15 and to more than half of the elderly population. In total, 620 billion yen (about 6 billion dollars) worth of coupons were distributed to 31 million people. The coupons had to be spent in the recipient's local community and expired within six months.

The Japanese government's rationale for the “use-it-or-lose-it” nature of the coupons was that this unusual feature would stimulate more spending than a conventional tax cut. The shopping coupon program is widely viewed in Japan as having been modestly successful in stimulating spending. Japan is currently (in March 2009) implementing a similar program, this time providing coupons worth 12,000 yen to every citizen (regardless of age or income), with an additional 8,000 yen for individuals under 18 or over 65. Other countries appear to have drawn similar conclusions from Japan’s earlier experience with shopping coupons. Taiwan, for example, distributed coupons worth about 120 US dollars to every citizen in February 2009.

However, it is not clear whether the effect of a "use it or lose it" coupon on spending would be different from that of a tax cut. The fact that the coupons expired may have prompted households to stock on storable goods, and thus may have had a large effect on spending on storable goods in the short run and a smaller effect on services or nondurables. However, this would imply that spending on storable goods would fall in the future, and the long run effect of the coupons on spending would depend on the effect of the coupons on the households' lifetime wealth. Therefore, while the effect of the coupons on spending on storable goods might differ from that of a tax cut in the short run,
the effect of the coupons on spending in the long run should be the same as that of a tax cut. Accordingly, the evidence on the effect of the Japanese shopping coupon program on expenditure should add to the evidence on the effect of tax cuts, such as the 2001 and 2008 tax rebates in the US, and should provide guidance on the potential impact of tax cuts such as the cuts in the 2009 U.S. fiscal stimulus bill. $ ^{23} $

Our goal in this paper is to measure the effect of the 1999 shopping coupon program on spending. We use two features of the shopping coupons to do this. First, among the non-elderly population, the number of coupons received by a family was entirely determined by the number of children under the age of 15. Using this fact, we measure the effect of the coupons on spending with household level data from Japan's Family Income and Expenditure Survey (FIES). We use this data to measure whether families with more children increased their spending when the coupons were distributed by more than families with a smaller number of children. We control for “normal” differences in the change in consumption between families with different numbers of children by using the seasonal patterns from 1990 through 1998 before the coupons were distributed.

Second, we exploit the fact that the coupons had to be spent within each household’s local community. This rule implies that if the coupons had a net effect on household spending, sales in retail stores should have increased by more in the communities where a larger number of people received the coupons. We use data on aggregate monthly retail sales in each prefecture from Japan's Current Survey of
Commerce to measure whether retail sales increased by more in the spring of 1999 in prefectures where a larger share of households received the coupons. As in the household analysis, we control for “normal” differences in seasonal consumption changes across prefectures using the seasonal changes in the years prior to 1999. Although we are limited to the variation across prefectures, a benefit of using prefectural level sales data is that it captures the effect of the coupons on spending of the elderly population as well as that of families with children.

We find that the coupons had a positive effect on expenditures on semi-durables in the month the coupons were distributed, but little effect on spending on non-durables or services. Estimates using the household level data (that only measure coupons distributed to families with children) suggest that the marginal propensity to consume (MPC) on semi-durables was 0.3 when the coupons were distributed in March but zero in subsequent months. We find larger estimates of the MPC when we measure aggregate retail sales in a prefecture: the MPC using aggregate retail sales is 0.35 in March and 0.14 in July. Both datasets also provide no evidence that spending declined after the coupons had been redeemed.

The remainder of this paper is organized as follows. The next section briefly outlines the shopping coupon program, while Section 3 describes the data used in the analysis. Section 4 then turns to the estimation of the effect of the program, comparing families with different numbers of children, while Section 5 uses regional sales data to analyze the impact of the program across prefectures. Section 6 concludes.

### 2. The “Shopping Coupon” Program
In the spring of 1999, the Japanese government distributed shopping coupons worth 20,000 yen per eligible person to roughly 31 million people. The coupon program was proposed by the Komeito (one of the three parties in the coalition government) on October 6th, 1998, without specifying a precise amount or who would be eligible. According to the Nikkei newspaper, the Komeito reached an agreement with the Liberal Democratic Party, the leading party in the coalition, on the coupon program on November 9th, 1998.

The final agreement between Komeito and the Liberal Democratic Party was that the coupons would be distributed to families with children and to the elderly. Specifically, families with children received a coupon for every child under the age of 15, without regard to the family's income. In contrast, coupons for the elderly were means tested, but 56 percent of the elderly over the age of 65 were estimated to qualify under the means-testing criteria used. $ ^{24} $ The Ministry of Home Affairs (the main administrator of the coupon program) estimates that 32 million people (roughly 25 percent of Japan's population) qualified for the coupons, of which 11.6 million were over the age of 65.

The shopping coupons were distributed by local governments. They had to be spent in the recipient's local community (city, town, or village). Local governments had the authority to allow the coupons to be spent outside the local community, and a small number of local governments in rural areas chose to do this (Ministry of Home Affairs (1998)). The coupons were not transferable and change was not provided for purchases smaller than 1,000 yen. The coupons could be spent on most consumption goods and
services and expired in September 1999 if they had not been redeemed by then. $ ^{25} $

The majority of local governments began to distribute the coupons in early March, 1999. The coupons were automatically distributed to families with children based on the data from household registration records maintained by Japanese local governments. The elderly, however, had to file an application with local governments to prove their eligibility. The administrative data provided by the Ministry of Home Affairs indicates that 31 million coupons had been distributed by the end of June 1999; 31 million is 97 percent of the 32 million people estimated to be eligible for the coupons. The administrative data also indicates that almost 40 percent of the coupons had been redeemed by April 20th, increasing to 79.5 percent by June 30 $ ^{th} $ , 1999. By the time the coupons were set to expire (September 30, 1999), 99.6 percent of the outstanding coupons had already been spent.

A survey in July 1999 of 9,000 coupon recipients provides additional information on when families received and spent the coupons (Economic Planning Agency (1999)). Figure 1 presents the data from this survey. Panel A shows that 80 percent of households with children received their coupons in March and another 20 percent in April. Panel B shows that more than 90 percent of the eligible elderly population received their coupons by the end of April. Figure 1 also shows that almost 30 percent of households with children redeemed the coupons by March, and 70 percent had done so by April.

In short, virtually all of the intended beneficiaries received and used the coupons, and most of the coupons were redeemed in March and April 1999. The question then is whether the coupons represent a net increase in spending, or whether they were spent on