A STUDY OF HOUSEHOLD INVESTMENT PATTERNS IN JAPAN: AN APPLICATION OF GENERALIZED TOBIT MODEL

In this paper we analyze the investment patterns of Japanese households using three kinds of generalized Tobit models. We consider the following three types of investments: (1) bank deposits, (2) long-term income-gain assets, and (3) capital-gain assets. Generalized Tobit models are called for because there are households which do not possess either or both of the last two types of assets. In our data every household does possess the first type of asset, and this fact will be incorporated into our models as a priori specification. The three models we estimate are a simultaneous equations Tobit model, a Dubin-McFadden type model, and a sequential Tobit model. The first model arises from a Kuhn-Tucker solution to the maximization of a quadratic utility function subject to the constraint that the sum of the investments into the three types of assets is equal to an exogenously-determined value of the total assets of a household. The second model is based on the assumption that there are fixed costs of owning the last two types of assets. Finally, the last model is derived from the assumption that a household first determines the amount of the first type of asset it should hold and second allocates whatever left into the other two types of assets. Simpler, more obvious ways to analyze our data are available, such as ordinary least squares, probit and l ogit, and standard Tobit. These estimates are also reported and compared with our elaborate estimates in a later section.