 Smooth it Like the 'Joneses'? Estimating Peer-Group Effects in Intertemporal Consumption ChoiceEconomic Journal, 2008, vol. 118, issue 527, 454-476 Abstract: Recent theoretical contributions have suggested peer-group effects as a potential explanation for several puzzles in macroeconomics but their empirical relevance for intertemporal consumption choice is an open question. We derive an extension of the standard life-cycle model that allows for consumption externalities. In this framework, we propose a social multiplier approach to distinguish true externalities from merely correlated effects. Estimating our model using US panel data, we find strong predictable co-movement of household consumption within peer groups. Although much of this co-movement reflects correlated effects only, there is statistically significant evidence for moderate consumption externalities across several plausible peer-group specifications. Copyright © 2008 The Author(s). Date: 2008 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ecj:econjl:v:118:y:2008:i:527:p:454-476 Ordering information: This journal article can be ordered from Access Statistics for this article Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen More articles in Economic Journal from Royal Economic Society Contact information at EDIRC. |
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