Smooth it Like the “Joneses?” Estimating Peer-Group Effects in Intertemporal Consumption Choice


Maurer, Jürgen ; Meier, André


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URL: https://ub-madoc.bib.uni-mannheim.de/2079
URN: urn:nbn:de:bsz:180-madoc-20794
Document Type: Working paper
Year of publication: 2008
The title of a journal, publication series: MEA Discussion Papers
Volume: 167
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Veröffentlichungen des MEA (Mannheim Research Institute For the Economics of Aging) > MEA Discussion Papers
Subject: 330 Economics
Classification: JEL: Z13 D91 D12 C23 ,
Subject headings (SWD): USA , Peer-Group , Mehr-Perioden-Modell , Verbraucherforschung , Panelanalyse
Abstract: Recent theoretical contributions have suggested peer-group effects as a potential explanation for several puzzles in macroeconomics, but their empirical relevance for intertemporal consumption choice is an open question. We derive an extension of the standard life-cycle model that allows for consumption externalities. In this framework, we propose a social multiplier approach to distinguish true externalities from merely correlated effects. Estimating our model using US panel data, we find strong predictable co-movement of household consumption within peer groups. Although much of this co-movement reflects correlated effects only, there is statistically significant evidence for moderate consumption externalities across several plausible peer-group specifications.

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Maurer, Jürgen ; Meier, André (2008) Smooth it Like the “Joneses?” Estimating Peer-Group Effects in Intertemporal Consumption Choice. Open Access MEA Discussion Papers Mannheim 167 [Working paper]
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