HABITS AND HETEROGENEITY IN DEMANDS: A PANEL DATA ANALYSIS

M. Dolores Collado () and Martin Browning

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We examine demand behaviour for intertemporal dependencies, using Spanishpanel data. We present evidence that there is both state dependence and correlatedheterogeneity in demand behaviour. Our specific findings are that food outside thehome, alcohol and tobacco are habit forming whereas clothing and small durablesexhibit durability. We conclude that demand analyses using cross-section data thatignore these effects may be seriously biased. On the other hand, the degree ofintertemporal dependence is not sufficiently strong to make composite `consumption'significantly habit forming, as has been suggested in some recent analyses.

Keywords: Habits; State dependence; correlated heterogeneity. (search for similar items in EconPapers)
JEL-codes: C72 C92 D44 H41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2006-11
New Economics Papers: this item is included in nep-pbe
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Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-25.pdf Fisrt version / Primera version, 2006 (application/pdf)

Related works:
Journal Article: Habits and heterogeneity in demands: a panel data analysis (2007)
Working Paper: Habits and Heterogeneity in Demands: a Panel Data Analysis (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2006-25

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