Habits and Heterogeneity in Demands: a Panel Data Analysis

Martin Browning and M. Dolores Collado ()

No 2004-18, CAM Working Papers from University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics

Abstract: We examine demand behaviour for intertemporal dependencies, using Spanish panel data. We present evidence that there is both state dependence and correlated heterogeneity in demand behaviour. Our specific findings are that food outside the home, alcohol and tobacco are habit forming whereas clothing and small durables exhibit durability. We conclude that demand analyses using cross-section data that ignore these effects may be seriously biased. On the other hand, the degree of intertemporal dependence is not sufficiently strong to make composite ‘consumption’ significantly habit forming, as has been suggested in some recent analyses.

Keywords: habit; demand (search for similar items in EconPapers)
JEL-codes: D91 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea
Date: 2004-06
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Related works:
Working Paper: HABITS AND HETEROGENEITY IN DEMANDS: A PANEL DATA ANALYSIS (2006)
Journal Article: Habits and heterogeneity in demands: a panel data analysis (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:kud:kuieca:2004_18

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