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Consumption, Habit Formation and Precautionary Saving: Evidence from the British Household Panel Survey

Guariglia, Alessandra, Rossi, M. (2002) Consumption, Habit Formation and Precautionary Saving: Evidence from the British Household Panel Survey. Oxford Economic Papers, 54 (1). pp. 1-19. ISSN 0030-7653. (doi:10.1093/oep/54.1.1) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:9494)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1093/oep/54.1.1

Abstract

In this paper, we generalise Weil's (1993) model, which is based on hybrid non‐expected utility preferences, by allowing for habit formation. We use this generalised model to derive an Euler equation, where current consumption changes depend on lagged changes and labour income risk. We then estimate this Euler equation using data from the British Household Panel Survey (BHPS) for the period 1992–97. Our results suggest that both labour income risk and past changes in consumption play an important role in determining current changes in consumption. We then compare the model with habits with the one without, and strongly reject the latter.

Item Type: Article
DOI/Identification number: 10.1093/oep/54.1.1
Subjects: H Social Sciences
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: G.F. Green
Date Deposited: 19 Oct 2008 01:33 UTC
Last Modified: 07 Jun 2019 15:06 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/9494 (The current URI for this page, for reference purposes)
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