The purpose of this section is to break down the total consumption expenditure into five categories (food and beverages, fuel and light charges, clothes, housing, and miscellaneous items) and estimate consumption function with wealth variables as explanatory variables for each commodity group. It is conjectured that the wealth variables enter the consumption function for each commodity group in a different fashion, as income has different effects on commodity spending. If it is the case, then wealth accumulation exerts influence on the structure of consumption by households.

The expenditure data for each commodity group is available in Annual Report of Prefectural Accounts. The specification of consumption function is basically the same as in the previous section except two points. Firstly, dependent variable is the ratio of real expenditure for each commodity group to real disposable income. Secondly, we add relative price variable to the list of as explanatory variables in consumption function. Relative price variable(RELP) is defined as the ratio of consumption deflator for commodity group to that of final consumption expenditure. It turns out that this relative price variable is significantly negative in fuel and light charges, clothes, and housing. For other groups of commodities, the relative price variables prove to have the wrong sign or be insignificant, so that it was dropped from the list of explanatory variables.

The estimation results are shown in Table 2-1 to 2-5. For food and beverages and fuel and light charges, the wealth variable does not play any role in consumption function. For clothes the liquid wealth is the only significant wealth variable, although it is barely significant at the standard significance level. The liquid wealth exerts a significant effect on the expenditure for housing and miscellaneous items. The size of the effects of liquid wealth on consumption expenditure is almost the same between housing and miscellaneous items. The tangible wealth is a significant explanatory variable in any specification of housing expenditure function, while it is only significant in the second row in Table 2-5 for miscellaneous items. The magnitude of the effects of tangible wealth on housing is almost twice as large as that on miscellaneous items. Note that expenditure for consumers' durables such as automobiles, furniture and electrical appliances are included in the housing category. Therefore the increase of tangible wealth as well as liquid wealth caused by asset price appreciation in the middle of 80's to the early 90's is partially responsible for a high growth of durables in that period. Quantitative evaluation of wealth effects will be discussed in details in Section 6. Most of the expenditure for services are contained in miscellaneous items, so that it is inferred that increase of liquid wealth in the recent business booms brought forth by stock price soaring led to a boost of expenditure for services.

It may be concluded from the estimation results above that liquid wealth is the most important component of wealth which directly stimulates consumption spending.

5. Estimation of Residential Investment Function with Wealth Variables

Private residential investment is the most volatile component among the spending items of