Abstract
| Original language | English |
|---|---|
| Journal | Journal of Business and Economic Statistics |
| Volume | 36 |
| Issue number | 2 |
| Pages (from-to) | 227-238 |
| Number of pages | 12 |
| ISSN | 0735-0015 |
| DOIs | |
| Publication status | Published - 2018 |
Keywords
- Habit formation
- Intertemporal elasticity of substitution
- Nonlinear models
- Relative risk aversion
Cite this
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Micro-level Estimation of Optimal Consumption Choice With Intertemporal Nonseparability in Preferences and Measurement Errors. / Gayle, Wayne-Roy; Khorunzhina, Natalia.
In: Journal of Business and Economic Statistics, Vol. 36, No. 2, 2018, p. 227-238.Research output: Contribution to journal › Journal article › Research › peer-review
TY - JOUR
T1 - Micro-level Estimation of Optimal Consumption Choice With Intertemporal Nonseparability in Preferences and Measurement Errors
AU - Gayle, Wayne-Roy
AU - Khorunzhina, Natalia
PY - 2018
Y1 - 2018
N2 - This article investigates the presence of habit formation in household consumption, using data from the Panel Study of Income Dynamics. We develop an econometric model of internal habit formation of the multiplicative specification. The restrictions of the model allow for classical measurement errors in consumption without parametric assumptions on the distribution of measurement errors. We estimate the parameters by nonlinear generalized method of moments and find that habit formation is an important determinant of household food-consumption patterns. Using the parameter estimates, we develop bounds for the expectation of the implied heterogenous intertemporal elasticity of substitution and relative risk aversion that account for measurement errors, and compute confidence intervals for these bounds. Supplementary materials for this article are available online.
AB - This article investigates the presence of habit formation in household consumption, using data from the Panel Study of Income Dynamics. We develop an econometric model of internal habit formation of the multiplicative specification. The restrictions of the model allow for classical measurement errors in consumption without parametric assumptions on the distribution of measurement errors. We estimate the parameters by nonlinear generalized method of moments and find that habit formation is an important determinant of household food-consumption patterns. Using the parameter estimates, we develop bounds for the expectation of the implied heterogenous intertemporal elasticity of substitution and relative risk aversion that account for measurement errors, and compute confidence intervals for these bounds. Supplementary materials for this article are available online.
KW - Habit formation
KW - Intertemporal elasticity of substitution
KW - Nonlinear models
KW - Relative risk aversion
KW - Habit formation
KW - Intertemporal elasticity of substitution
KW - Nonlinear models
KW - Relative risk aversion
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U2 - 10.1080/07350015.2016.1149071
DO - 10.1080/07350015.2016.1149071
M3 - Journal article
VL - 36
SP - 227
EP - 238
JO - Journal of Business and Economic Statistics
JF - Journal of Business and Economic Statistics
SN - 0735-0015
IS - 2
ER -