Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105988
Authors: 
Schmid, Kai D.
Drechsel-Grau, Moritz
Year of Publication: 
2013
Series/Report no.: 
IMK Working Paper 123
Abstract: 
In this paper we estimate the relevance of habits versus interpersonal comparisons for the consumption behavior of U.S. households. We exploit information from the recently released consumption expenditure data of the Panel Study of Income Dynamics (PSID) covering the time span from 1999 to 2009. We find that both habits, measured as lagged consumption, and envy motives, measured as reactions of consumption to consumption changes of households that are perceived to be richer, matter substantially. Hence, household consumption is not only determined by habit persistence but also by interpersonal comparisons. Most importantly, our estimations reveal that envy motives might play a much more prominent role for households' consumption choices than habits do.
Subjects: 
Household Consumption
Reference Consumption
Habits
Relative Income Hypothesis
Difference GMM
PSID
JEL: 
C23
D12
D91
E21
Document Type: 
Working Paper

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