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http://ssrn.com/abstract=1444428
 
 

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Smooth It Like the 'Joneses'? Estimating Peer-Group Effects in Intertemporal Consumption Choice


Jürgen Maurer


University of Mannheim

Andre Meier


International Monetary Fund (IMF)

September 1, 2007

The Economic Journal, Vol. 118, No. 527, pp. 454-476, February 2008
MEA Discussion Paper No. 167-08

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.

Number of Pages in PDF File: 46

JEL Classification: C23, D12, D91, Z13

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Date posted: August 11, 2009  

Suggested Citation

Maurer, Jürgen and Meier, Andre, Smooth It Like the 'Joneses'? Estimating Peer-Group Effects in Intertemporal Consumption Choice (September 1, 2007). The Economic Journal, Vol. 118, No. 527, pp. 454-476, February 2008; MEA Discussion Paper No. 167-08. Available at SSRN: http://ssrn.com/abstract=1444428 or http://dx.doi.org/10.2139/ssrn.1444428

Contact Information

Jürgen Maurer
University of Mannheim
Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany
Andre Meier (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
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