Survey Evidence on Habit Formation: Existence, Specification, and Implication

15:40-17:00, Friday, November 8, 2024

I-206, Boxue Building

Dr. Jiannan Zhou is an Assistant Professor at the School of Economics, Shandong University. His research focuses on behavioral economics, macroeconomics, and econometrics. Jiannan holds a Ph.D. in Economics from the University of Colorado Boulder. His work has been published in Economics Letters etc. He serves as a reviewer for Review of Economics and Statistics etc.

Habit formation is a staple of macroeconomics and finance, but insufficient micro evidence has led to controversies over its existence, specification, and implication. This paper documents new and extensive micro evidence for habit formation, through survey experiments eliciting ten preference parameters informative about habit formation. Habit forms internally, depreciates by around two-thirds annually, and exerts twice the welfare impact of peer effect. I also propose and implement four tests of additive and multiplicative habits and find that these ubiquitous preferences are rejected. Simulations show that combining habit formation with peer effect could explain the Easterlin paradox.

For more information of the seminar, scan the following QR code(s) to join Tencent QQ group (904 544 292) or WeChat group named "IAER Seminar (5)", please.

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(QR code is valid until November 8, 2024)