Habit formation and intertemporal substitution in individual food consumption

Narayan Y. Naik, Michael Moore

Research output: Contribution to journalArticle

58 Scopus citations

Abstract

Individual food consumption data are used to examine three issues. First, is food consumption linked intertemporally at the individual level? Second, does the association between current and past consumption reflect habit or heterogeneity? Third, what do the estimates imply about the intertemporal elasticity of substitution? We find that habit matters, that controlling for heterogeneity reduces estimated habit effects, and that the product of the estimated intertemporal elasticity of substitution and the risk aversion parameter is less than one. These results all lead to rejection of time separable specifications of intertemporal consumption behavior.

Original languageEnglish (US)
Pages (from-to)321-328
Number of pages8
JournalReview of Economics and Statistics
Volume78
Issue number2
DOIs
StatePublished - Jan 1 1996

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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