Consumption Smoothing in Metropolis: Evidence from Working-class Households in Prewar Tokyo

Abstract: I analyzed the risk-coping strategies among factory worker households in early 20th-century Tokyo. I digitized and analyzed a unique daily longitudinal household budget survey to determine how consumption was impacted by idiosyncratic shocks. I found that while the households were so vulnerable that the shocks impacted their consumption levels, the estimated income elasticity for food consumption was relatively low in the short run. The analysis using adverse health shock confirms the robustness of the results. The result of mechanism analysis suggests that credit purchases with local retailers smoothed short-run food consumption. Despite the potential loss of profit, retailers in a competitive situation allowed consumers to trade on credit. This shows the roles of informal credit institutions in mitigating vulnerability among urban worker households.