An Empirical Analysis of Risks and Consumption Variation of Japanese Youth

D12

J31

E21

This study investigates the importance of various risks faced by Japanese youth on the basis of a precautionary saving model with different employment status such as regular, irregular, and unemployment. Using large panel data covering about 30,000 individuals from the annual Longitudinal Survey of Adults in 21st Century conducted by the Ministry of Health, Labour and Welfare, we find that irregular workers face (1) higher risks of losing jobs, (2) lower wages, and (3) larger income variations than regular workers. When workers’ job status changes from regular to irregular and vice versa, their consumption levels tend to decrease and increase, respectively. A dynamic model of consumption and employment status can reproduce the response of consumption to such change in employment to a great extent. We also find that the most important factor behind such consumption changes is the wage difference between regular and irregular workers.