Advances in Economics and Business Vol. 1(2), pp. 222 - 232
DOI: 10.13189/aeb.2013.010217
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Habit Formation and U.S. Household Consumption: A Semiparametric Panel Data Analysis


Chonghyun Christie Byun*
Department of Economics, Wabash College, Crawfordsville, 47933, Indiana, United States

ABSTRACT

Using household panel data from the PSID, a semiparametric panel data model is estimated and examined for the presence of habit formation. Previous studies in this area were based on linear models, and the semiparametric model is an improvement over the latter in that it does not specify a particular functional form on the data generating process. Estimates of the model show evidence of habit formation for a substantial percentage of the observations. An examination of households by their demographic characteristics as well as by job status yields additional information and supporting evidence on the existence of habit formation.

KEYWORDS
Habit Formation, Semiparametric Estimation, Panel Data

Cite this paper
Chonghyun Christie Byun . "Habit Formation and U.S. Household Consumption: A Semiparametric Panel Data Analysis." Advances in Economics and Business 1.2 (2013) 222 - 232. doi: 10.13189/aeb.2013.010217.