Template-type: ReDIF-Paper 1.0
Author-Name: Casado, Jose Maria
Author-Email: jmcasado@bde.es
Author-Workplace-Name: Bank of Spain
Author-Name: Alvarez-Cuadrado, Francisco
Author-Email: francisco.alvarez-cuadrado@mcgill.ca
Author-Workplace-Name: McGill University
Author-Name: Labeaga, Jose Maria
Author-Email: labeaga@merit.unu.edu
Author-Workplace-Name: UNED, and UNU-MERIT/MGSoG
Author-Name: Sutthiphisal, Dhanoos
Author-Email: dhanoos.sutthiphisal@gmail.com
Author-Workplace-Name: Bank of Spain
Title: Envy and habits: Panel data estimates of interdependent preferences
Abstract: We estimate the importance of preference interdependence from
 	consumption choices. Our strategy follows the literature that tests the
 	constraints imposed by optimality in the evolution of individual
 	consumption. We derive an Euler equation from a preference specification
 	that allows for non-separabilities across households and across time.
 	The introduction of habits and envy places additional restrictions on
 	the evolution of the optimal consumption path. We use a unique data set
 	that follows a sample of 3,200 households for up to eight consecutive
 	quarters to test these restrictions. Our estimates suggest that, if one
 	defines utility over consumption services, a large fraction of these
 	services is relative, with one fourth of the weight placed in the
 	consumption of the reference group and more than one third of the weight
 	placed on the agent's past consumption. 
Classification-JEL: C23, D12, D91
Keywords: Consumption Externalities, Habit Formation, Panel Data
Series: UNU-MERIT Working Papers
Creation-Date: 2012
Number: 054
File-URL: http://www.merit.unu.edu/publications/wppdf/2012/wp2012-054.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2012054