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Envy and Habits: Panel Data Estimates of Interdependent Preferences
Author(s) -
AlvarezCuadrado Francisco,
Casado Jose Maria,
Labeaga Jose Maria
Publication year - 2016
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12111
Subject(s) - consumption (sociology) , interdependence , preference , economics , panel data , econometrics , revealed preference , fraction (chemistry) , set (abstract data type) , microeconomics , computer science , social science , programming language , chemistry , organic chemistry , sociology , political science , law
We estimate the importance of preference interdependence from consumption choices. Our strategy follows the literature that tests the constraints imposed by optimality on the evolution of individual consumption. The introduction of habits and envy places additional restrictions on the evolution of the optimal consumption path. We use a unique data set to test these restrictions. Our estimates suggest that, if one defines utility over consumption services, a large fraction of these services is relative, with one third of the weight placed in the consumption of the reference group and another third placed in the agent's past consumption.