Habits and Envy: What Drives the Consumption Behavior of U.S. Households? Evidence from PSID, 1999-2009

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IMK Working Paper ; No. 123

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Consumer Economics: Empirical Analysis ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Macroeconomics: Consumption; Saving; Wealth
• Subject: Household Consumption ; Reference Consumption ; Habits ; Relative Income Hypothesis ; Difference GMM ; PSID

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schmid, Kai D. ; Drechsel-Grau, Moritz
• Event: Veröffentlichung
• (who): Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
• (where): Düsseldorf
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/105988
• URN: urn:nbn:de:101:1-2014031110232
• Last update: 10.03.2025, 11:45 AM CET