3. Estimation of Total Consumption Function with Wealth Variables

Total consumption function with a variety of wealth variables is estimated on the basis of cross-sectional data of 47 prefectures. With a view to increasing the number of observations, we pooled the prefectural cross-sectional data at three different years. Before presenting the estimation results, a brief explanation on the data set utilized in estimation is in order.

First of all, what is most difficult to collect is the data of wealth stock on a prefectural basis. Financial wealth data come from National Survey of Family Income and Expenditure (Statistical Bureau of Management and Coordination Agency) in 1979, 1984, and 1989. Net financial wealth(FW) is defined as the financial wealth minus debt outstandings. Liquid wealth(LW) is defined as the gross financial wealth minus life insurance. The stock of securities(SEC) is also available in National Survey of Family Income and Expenditure and it includes loan trust, money in trust, bonds, open-end bond trust, stocks and shares, and unit and open-end trust. Other liquid wealth(OLW) is obtained simply by subtracting securities stock from total liquid wealth. Note that the reported stock is at the end of November in the year when the survey is conducted.

As for the tangible wealth, we can obtain the series of land stock at market value by prefectures in Annual Report on National Accounts (Economic Planning Agency). The land stock includes residential land, cultivated land, and others. $ ^{5)} $ The reported stock is at the end of calendar year, which leads by one month to the recording date of financial wealth data. $ ^{6)} $ Finally total wealth(TW) is calculated as the sum of net financial wealth and tangible wealth.

The data of consumption and income are basically taken from Annual Report on Prefectural Accounts (Economic Research Institute of Economic Planning Agency). The data reported in Annual Report on Prefectural Accounts are on a fiscal basis. Therefore we collect the data of consumption and income in the fiscal year of 1980, 1985, and 1990 so that the consumption and income data may be consistent with the wealth data. As for the income data, available are compensation of employees, property income, and entrepreneurial income in Annual Report on Prefectural Accounts. What is to be constructed is disposable income of households. To do so, the following items are needed: direct tax on income, current transfers to private non-profit institutions serving households, and social assistance grants. $ ^{7} $ Direct tax on income is computed on the basis of Annual Report on National Tax Administration (National Tax Administration) and Annual Report on Local Public Finance (Local Public Finance Association). We can compute the payment of national tax from Annual Report on National Tax Administration and that of local tax from Annual Report on Local Public Finance. National tax is composed of income tax paid by self-assessment and income tax withheld at the source. Local tax includes prefectural tax, municipal tax, enterprise tax, and half of automobile tax.

As for the current transfers to private non-profit institutions serving households, it is calculated from the religious contribution and obligation fees reported in Annual Report on the Family Income and Expenditure Survey (Statistical Bureau of Management and Coordination Agency). The social