Deep Habits in Consumption: A Spatial Panel Analysis Using Scanner Data
Using scanner data from a large European retailer, this paper empirically assesses deep habit formation in consumption. Deep habit formation constitutes a possible source of price stickiness and helps to mimic procyclical labour and real wage dynamics that are present in macro data. To gauge the existence and the extent of deep habits in consumption, we estimate a dynamic timespace simultaneous model for consumption expenditure at different levels of product aggregation. This spatial panel model enables us to test for both internal and external deep habit formation at the same time. The former captures inertia or persistence in consumption, and is included in the empirical specification as a time lag. The latter captures preference interdependence across households and is captured by a spatial lag. Our results show mixed evidence with respect to internal habit formation, whereas the external habit effect is almost always positive and significant.
|Date of creation:||Dec 2012|
|Contact details of provider:|| Postal: Hoveniersberg 4, B-9000 Gent|
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page: http://www.ugent.be/eb
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nakamura, Emi & Steinsson, Jón, 2011. "Price setting in forward-looking customer markets," Journal of Monetary Economics, Elsevier, vol. 58(3), pages 220-233.
- 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, 08.
- Casado, Jose Maria & Alvarez-Cuadrado, Francisco & Labeaga, Jose Maria & Sutthiphisal, Dhanoos, 2012. "Envy and habits: Panel data estimates of interdependent preferences," MERIT Working Papers 054, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Francisco Alvarez-Cuadrado & Jose Maria Casado & Jose Maria Labeaga & Dhanoos Sutthiphisal, 2012. "Envy and habits: panel data estimates of interdependent preferences," Working Papers 1213, Banco de España;Working Papers Homepage.
- Maarten Dossche & Freddy Heylen & Dirk Van den Poel, 2010. "The Kinked Demand Curve and Price Rigidity: Evidence from Scanner Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 723-752, December.
- M. Dossche & F. Heylen & D. Van Den Poel, 2006. "The Kinked Demand Curve and Price Rigidity : Evidence from Scanner Data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/429, Ghent University, Faculty of Economics and Business Administration.
- Maarten Dossche & Freddy Heylen & Dirk Van den Poel, 2006. "The kinked demand curve and price rigidity : evidence from scanner data," Working Paper Research 99, National Bank of Belgium.
- Morten Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2006. "Deep Habits," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 195-218.
- Ravn, Morten O & Schmitt-Grohé, Stephanie & Uribe, Martín, 2004. "Deep Habits," CEPR Discussion Papers 4269, C.E.P.R. Discussion Papers.
- Morten O. Ravn & Stephanie Schmitt-Grohe, 2004. "Deep Habits," 2004 Meeting Papers 208, Society for Economic Dynamics.
- Morten Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2004. "Deep Habits," NBER Working Papers 10261, National Bureau of Economic Research, Inc.
- B. Verhelst & D. Van Den Poel, 2010. "Price rigidity in Europe and the US: A comparative analysis using scanner data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/684, Ghent University, Faculty of Economics and Business Administration.
- Dirk Van den Poel & Benjamin Verhelst, 2011. "Price Rigidity in Europe and the US: A Comparative Analysis Using Scanner Data," 2011 Meeting Papers 524, Society for Economic Dynamics.
- B. Verhelst & D. Van Den Poel, 2012. "Implicit Contracts and Price Stickiness: Evidence from Customer-Level Scanner Data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/776, Ghent University, Faculty of Economics and Business Administration.
- Anselin, Luc & Hudak, Sheri, 1992. "Spatial econometrics in practice : A review of software options," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 509-536, September.
- Punnoose Jacob, 2015. "Deep Habits, Price Rigidities, and the Consumption Response to Government Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(2-3), pages 481-510, 03.
- Punnoose Jacob, 2013. "Deep habits, price rigidities and the consumption response to Government spending," Reserve Bank of New Zealand Discussion Paper Series DP2013/03, Reserve Bank of New Zealand.
- Punnoose Jacob, 2013. "Deep Habits, Price Rigidities and the Consumption Response to Government Spending," CAMA Working Papers 2013-72, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Korniotis, George M., 2010. "Estimating Panel Models With Internal and External Habit Formation," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(1), pages 145-158.
- Eric Bradlow & Bart Bronnenberg & Gary Russell & Neeraj Arora & David Bell & Sri Duvvuri & Frankel Hofstede & Catarina Sismeiro & Raphael Thomadsen & Sha Yang, 2005. "Spatial Models in Marketing," Marketing Letters, Springer, vol. 16(3), pages 267-278, December.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June. Full references (including those not matched with items on IDEAS)