Estimating Intertemporal and Intratemporal Substitutions When Both Income and Substitution Effects Are Present: The Role of Durable Goods

Pakoš, Michal

doi:10.1198/jbes.2009.07046

Cited by 58 publications

(43 citation statements)

References 43 publications

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“…Our results are also consistent with the findings in Naik and Moore (1996), who in the habit-formation framework, find values of the IES slightly larger than our values but lower than those reported in Weber (1993, 1995) and Vissing-Jorgensen (2002). Our results indicate the IES is substantially less than one and quantitatively close to the small values of IES found in Hall (1988) and more recently in Pakoš (2011). Relative to the values reported in the surveybased literature, our bounds on the IES are considerably more narrow.…”

Section: Intertemporal Elasticity Of Substitution and Relative Risk Asupporting

confidence: 81%

Micro-Level Estimation of Optimal Consumption Choice With Intertemporal Nonseparability in Preferences and Measurement Errors

Gayle

Khorunzhina

2017

Journal of Business & Economic Statistics

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This paper investigates the presence of habit formation in household consumption, using data from the Panel Study of Income Dynamics. We develop an econometric model of internal habit formation of the multiplicative specification. The restrictions of the model allow for classical measurement errors in consumption without parametric assumptions on the distribution of measurement errors. We estimate the parameters by nonlinear generalized method of moments and find that habit formation is an important determinant of household foodconsumption patterns. Using the parameter estimates, we develop bounds for the expectation of the implied heterogeneous intertemporal elasticity of substitution and relative risk aversion that account for measurement errors, and compute confidence intervals for these bounds.

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Section: Intertemporal Elasticity Of Substitution and Relative Risk Asupporting

confidence: 81%

Micro-Level Estimation of Optimal Consumption Choice With Intertemporal Nonseparability in Preferences and Measurement Errors

Gayle

Khorunzhina

2017

Journal of Business & Economic Statistics

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“…10 Values of the elasticity of intertemporal substitution, 1/ , close to zero are in line with the estimates reported, e.g., by Hall [16] and Pakos [17].…”

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confidence: 75%

Discrete Versus Continuous Time in an Endogenous Growth Model with Durable Consumption

Gómez¹

2014

Mathematical Economics Letters

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“…While a few studies have accounted for intratemporal substitution between durables and non-durables when estimating the IES (e.g. Ogaki and Reinhart, 1998;Pakos, 2011;, they do not directly incorporate the response of durables into the IES estimate. Second, the approach allows me to assess whether durable consumption is more sensitive to intertemporal price variation than non-durable consumption.…”

Section: Introductionmentioning

confidence: 99%

The Household Expenditure Response to a Consumption Tax Rate Increase

Cashin

2017

FEDS

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This study measures the effect of an increase in Japan's Value Added Tax rate on the timing of household expenditures and consumption, which do not necessarily coincide. The analysis finds that durable and storable expenditures surged in the month prior to the tax rate increase, fell sharply upon implementation, but quickly returned to their previous long-run levels. Non-storable non-durable expenditures increased slightly in the month prior to the tax rate increase, but were otherwise unresponsive. A dynamic structural model of household consumption reveals that the observed expenditure responses were driven by stockpiling behavior, the insensitivity of durable and non-durable consumption to a change in the real interest rate, and strong complementarities between durables and non-durables. The results suggest that salient intertemporal price variation may have a large, though highly transitory impact on household expenditures.

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Estimating Intertemporal and Intratemporal Substitutions When Both Income and Substitution Effects Are Present: The Role of Durable Goods

Cited by 58 publications

References 43 publications

Micro-Level Estimation of Optimal Consumption Choice With Intertemporal Nonseparability in Preferences and Measurement Errors

Micro-Level Estimation of Optimal Consumption Choice With Intertemporal Nonseparability in Preferences and Measurement Errors

Discrete Versus Continuous Time in an Endogenous Growth Model with Durable Consumption

The Household Expenditure Response to a Consumption Tax Rate Increase

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