Consumption and habits: evidence from panel data
Jose Labeaga and
David Lopez-Salido
Authors registered in the RePEc Author Service: Raquel Carrasco
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de EconomÃa
Abstract:
The purpose of this paper is to test for the presence of habit formation in consumption decisions using household panel data. We use the test proposed by Meghir and Weber (1996) and estimate the within -period marginal rate of substitution between commodities, which is robust to the presence of liquidity constraints. To that end, we use a Spanish panel data set in which households are observed up to eight consecutive quarters. This temporal dimension is crucial, since it allows us to take into account time invariant unobserved heterogeneity across households ("fixed effects") and, therefore, to investigate if the relationship between current and past consumption reflects habits or heterogeneity. Our results conf irm the importance of accounting for fixed effects when analyzing intertemporal consumption decisions allowing for time non-separabilities. Once fixed effects are controlled for and a proper set of instruments is used, the results yield supporting evidence of habit formation in the demand system of food at home, transport and services.
Date: 2002-07
New Economics Papers: this item is included in nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)
Downloads: (external link)
https://e-archivo.uc3m.es/rest/api/core/bitstreams ... 615342859040/content (application/pdf)
Related works:
Journal Article: Consumption and Habits: Evidence from Panel Data (2005)
Working Paper: Consumption and Habits: Evidence from Panel Data (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we023415
Access Statistics for this paper
More papers in UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de EconomÃa
Bibliographic data for series maintained by Ana Poveda ().