Habits and Heterogeneity in Demands: a Panel Data Analysis
AbstractWe 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.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2004-18.
Length: 17 pages
Date of creation: Jun 2004
Date of revision:
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Other versions of this item:
- M. Dolores Collado & Martin Browning, 2007. "Habits and heterogeneity in demands: a panel data analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 625-640.
- M. Dolores Collado & Martín Browning, 2006. "Habits And Heterogeneity In Demands: A Panel Data Analysis," Working Papers. Serie AD 2006-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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