Comment on “Who Faces Higher Prices? An Empirical Analysis Based on Japanese Homescan Data”

• Published date: 01 January 2014
• Author: Michio Suzuki
• DOI: http://doi.org/10.1111/aepr.12051
• Date: 01 January 2014

Comment on “Who Faces Higher Prices?

An Empirical Analysis Based on Japanese

Homescan Data”

Michio SUZUKI†

University of Tokyo

JEL codes: D12, D30

Abe and Shiotani (2014) examine cross-sectional variation in prices facing households

using Japanese homescan data. Following the seminal work by Aguiar and Hurst (2007)

(AH, hereafter), Abe and Shiotani construct a price index at the household level and

document that there is substantial heterogeneity in the price index. Interestingly, though

the life-cycle profile of the price index is flatter, older households shop at higher prices

than younger households in Japan, which is in sharp contrast to the patterns docu-

mented by AH for the USA. Furthermore, Abe and Shiotani find that bargain sales

explain variations in prices to a large extent, and younger households take advantage of

promotions more extensively than older households in Japan. Consistent with AH,

however, the household-level price index increases with income and decreases with the

shopping frequency in Japan.

This work has important implications for the measurement of household consump-

tion. In most empirical analysis, economists use nondurable expenditure deflated by an

appropriate aggregate price index as a measure of consumption. However, if households

purchase the same commodities at different prices, the consumption measure may be

biased. As Abe and Shiotani point out, the evidence for the heterogeneity in the price

index is also important for monetary policy.

I start my discussion with the patterns of the discount use. Abe and Shiotani docu-

ment that the elderly do not use discounts as extensively as the young. It is a little puz-

zling because the data suggest that older households shop more frequently, even though

the standard deviation is large. Abe and Shiotani show that the store choices of house-

holds partially account for the pattern: older households use specialized stores more than

younger households, while younger households use pharmacy and home improvement

stores to a larger extent. In addition,the following two hypotheses may be worth examin-

ing to obtain a better understanding of the pattern. First, note that data on discount use

contain membership discounts in AH, while, because of data limitation, Abe and

Shiotani’s paper focuses on the use of temporary sales measured by the fraction of

expenditure spent at the “bargain” prices. If the temporary sales are concentrated when

younger households visit stores, for example in the evening, younger households may be

†Correspondence: Michio Suzuki, Graduate School of Economics, The University of Tokyo, 7-3-1

Hongo Bunkyo-ku, Tokyo 113-0033, Japan. Email: msuzuki@e.u-tokyo.ac.jp

bs_bs_banner

doi: 10.1111/aepr.12051 Asian Economic Policy Review (2014) 9, 116–117

© 2014 The Author

Asian Economic Policy Review © 2014 Japan Center for Economic Research

116