IDEAS home Printed from https://ideas.repec.org/p/lec/leecon/13-08.html
   My bibliography  Save this paper

Testing for Intertemporal Nonseparability

Author

Listed:
  • Ian Crawford
  • Matthew Polisson

Abstract

This paper presents a nonparametric analysis of intertemporal models of consumer choice that relax consumption independence. We compare the revealed preference conditions for the intertemporally nonseparable models of rational habit formation and rational anticipation. We show that these models are nonparametrically equivalent in the usual empirical setting.

Suggested Citation

  • Ian Crawford & Matthew Polisson, 2013. "Testing for Intertemporal Nonseparability," Discussion Papers in Economics 13/08, Division of Economics, School of Business, University of Leicester, revised Jul 2013.
    • Handle: RePEc:lec:leecon:13/08
    as

    Download full text from publisher

    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp13-08.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
    3. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
    4. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory and Anticipatory Feelings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 55-79.
    5. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April.
    6. Meghir, Costas & Weber, Guglielmo, 1996. "Intertemporal Nonseparability or Borrowing Restrictions? A Disaggregate Analysis Using a U.S. Consumption Panel," Econometrica, Econometric Society, vol. 64(5), pages 1151-1181, September.
    7. Lawrence J. Christiano & Michele Boldrin & Jonas D. M. Fisher, 2001. "Habit Persistence, Asset Returns, and the Business Cycle," American Economic Review, American Economic Association, vol. 91(1), pages 149-166, March.
    8. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    9. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-543, June.
    10. Christopher D. Carroll & Jody Overland & David N. Weil, 1995. "Saving and growth with habit formation," Working Papers 95-42, Brown University, Department of Economics.
    11. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 257-275, April.
    12. Felix Kubler, 2008. "Is Intertemporal Choice Theory Testable?," Lecture Notes in Economics and Mathematical Systems, in: Computational Aspects of General Equilibrium Theory, pages 79-91, Springer.
    13. Ian Crawford, 2010. "Habits Revealed," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1382-1402.
    14. Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, vol. 97(387), pages 666-684, September.
    15. Browning, Martin, 1989. "A Nonparametric Test of the Life-Cycle Rational Expectations Hypothesis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 979-992, November.
    16. Jevons, William Stanley, 1871. "The Theory of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number jevons1871.
    17. Thomas Demuynck & Ewout Verriest, 2013. "I’Ll Never Forget My First Cigarette: A Revealed Preference Analysis Of The “Habits As Durables” Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 717-738, May.
    18. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    19. Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, vol. 90(3), pages 367-390, June.
    20. Paul A. Samuelson, 1937. "A Note on Measurement of Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 155-161.
    21. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 419-425.
    22. Kreps, David M & Porteus, Evan L, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Econometrica, Econometric Society, vol. 46(1), pages 185-200, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cherchye, Laurens & De Rock, Bram & Kerstens, Pieter Jan, 2018. "Production with storable and durable inputs: Nonparametric analysis of intertemporal efficiency," European Journal of Operational Research, Elsevier, vol. 270(2), pages 498-513.
    2. Peter Levell, 2014. "Revealed preference and consumption behaviour at retirement," IFS Working Papers W14/29, Institute for Fiscal Studies.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ian Crawford, 2007. "A nonparametric analysis of habits models," CeMMAP working papers CWP30/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    3. Santiago Budría, 2008. "An Exploration of Asset Returns in a Production Economy with Relative Habits," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 36(3), pages 261-274, September.
    4. Bouakez, Hafedh & Cardia, Emanuela & Ruge-Murcia, Francisco J., 2005. "Habit formation and the persistence of monetary shocks," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1073-1088, September.
    5. Francisco Alvarez-Cuadrado & Jose Maria Casado & Jose Maria Labeaga, 2016. "Envy and Habits: Panel Data Estimates of Interdependent Preferences," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(4), pages 443-469, August.
    6. Morhaim, Lisa & Ulus, Ayşegül Yıldız, 2023. "On history-dependent optimization models: A unified framework to analyze models with habits, satiation and optimal growth," Journal of Mathematical Economics, Elsevier, vol. 105(C).
    7. Diaz, Antonia & Pijoan-Mas, Josep & Rios-Rull, Jose-Victor, 2003. "Precautionary savings and wealth distribution under habit formation preferences," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1257-1291, September.
    8. Goncalo Monteiro & Stephen J. Turnovsky, 2016. "Anticipated consumption and its impact on capital accumulation and growth: “Forward-looking” versus “backward-looking” consumption reference," International Journal of Economic Theory, The International Society for Economic Theory, vol. 12(3), pages 203-232, September.
    9. Goncalo Monteiro & Stephen Turnovsky, 2013. "Anticipated Consumption and its Impact on Capital Accumulation and Growth: 'Forward-Looking' vs. 'Backward-Looking' Consumption Reference," CESifo Working Paper Series 4536, CESifo.
    10. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    11. Bibaswan Chatterjee & Rolando Escobar‐Posada & Goncalo Monteiro, 2023. "Anticipation in leisure—Effects on labor‐leisure choice," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(2), pages 384-412, June.
    12. Been-lon Chen & Yu-shan Hsu, 2009. "Is admiration a source of indeterminacy when the speed of habit formation is finite?," Economics Bulletin, AccessEcon, vol. 29(4), pages 3041-3049.
    13. Raquel Carrasco & José M. Labeaga & J. David López-Salido, 2005. "Consumption and Habits: Evidence from Panel Data," Economic Journal, Royal Economic Society, vol. 115(500), pages 144-165, January.
    14. Eduard Dubin & Olesya V. Grishchenko & Vasily Kartashov, 2012. "Habit formation heterogeneity: Implications for aggregate asset pricing," Finance and Economics Discussion Series 2012-07, Board of Governors of the Federal Reserve System (U.S.).
    15. van den Bijgaart, I.M., 2017. "Too slow a change? Deep habits, consumption shifts and transitory tax," Working Papers in Economics 701, University of Gothenburg, Department of Economics.
    16. Johdo, Wataru, 2009. "Habit persistence and stagnation," Economic Modelling, Elsevier, vol. 26(5), pages 1110-1114, September.
    17. Vasilev, Aleksandar, 2020. "Indeterminacy with preferences featuring multiplicative habits in consumption: lessons from Bulgaria (1999-2016)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    18. Aleksandar Vasilev, 2021. "Indeterminacy with preferences featuring multiplicative habits in consumption," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 64(3), pages 1-16.
    19. Emmerling, Johannes & Qari, Salmai, 2017. "Car ownership and hedonic adaptation," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 29-38.
    20. Jaime Alonso-Carrera & Jordi Caball?Author-Email: jordi.caballe@uab.es & Xavier Raurich, 2001. "Income Taxation with Habit Formation and Consumption Externalities," UFAE and IAE Working Papers 496.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

    More about this item

    Keywords

    Anticipation; habits; revealed preference; time separability;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lec:leecon:13/08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Abbie Sleath (email available below). General contact details of provider: https://edirc.repec.org/data/deleiuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.