Female labor participation reshapes consumer demand dynamics in Japan
A new Bank of Japan working paper estimates demand function parameters for Japanese consumer products over three decades using granular point-of-sale data. It finds that increased female labor force participation has reduced consumer price sensitivity and altered demand curvature in recent years.
Decades of shifting consumer price sensitivity
This study, utilizing highly granular point-of-sale (POS) data and advanced machine learning techniques, estimates key demand function parameters for a wide array of Japanese consumer products over the past three decades.
The research quantifies price elasticity and demand curvature, from which market-specific markups are also derived.
While the aggregate-level median price elasticity and markups demonstrated relative stability over the long term, recent years have shown a modest decrease in the absolute value of median price elasticity and a corresponding increase in markups.
Furthermore, the analysis indicates that demand curvature initially increased until the mid-2010s before subsequently declining.
These findings highlight significant cross-product heterogeneity underlying the observed aggregate stability, suggesting complex underlying market dynamics.
Socio-economic forces reshape consumer behavior
The paper's panel analysis uncovers a significant relationship between the estimated demand function parameters and crucial socio-economic factors, including labor force participation and market concentration.
A key finding is the identified rise in female labor force participation as a primary driver behind the recent decline in both absolute price elasticity and demand curvature.
This suggests that such shifts in societal factors, particularly increased labor participation, have fundamentally altered consumer behavior, leading to a diminished sensitivity to price changes across various product categories.
The study thus provides a novel perspective on how demographic and structural changes can influence market dynamics.
Granular insights, implicit implications
This study offers a valuable, data-rich exploration into the micro-level dynamics of consumer demand, providing a fresh perspective beyond traditional aggregate analyses.
While the identified link between female labor participation and price sensitivity is a compelling insight, the direct policy implications for monetary authorities are not explicitly drawn.
Further research could bridge this gap by detailing how these shifts in consumer behavior might transmit into broader inflation dynamics and policy effectiveness.