The Showa Depression in 1930 decreased the expenses on human capital investment of agricultural household as with the farm income. Despite the recovery of farm income in the 1930s, the human capital investment as well as total expenditure still continued to stagnate. To examine the decision on the human capital investment by agricultural households under the reconstruction period, this paper estimates the wealth effect on educational and medical expenditure using the panel dataset obtained from a farm household survey. After controlling for household’s fixed effect and the endogeneity of wealth level, measured by total annual expenditure, we find that the medical expenditure has a wealth effect, but the educational expenditure has not. Short-term credit constraint on agricultural household may not cause the stagnation of investment in education during the reconstruction period. Further investigations on the household’s fixed effect reveal that the investment in education has a class effect that landed farmers invest more in education than do other land ownership classes. We also find that the number of male infants increases the medical expenditure, but females do not have such effect.
