Hypothetical Intertemporal Consumption Choices

Abstract

The paper extends and replicates part of the analysis by Barsky, Juster, Kimball, and Shapiro (1997), which exploits hypothetical choices among different consumption streams to infer intertemporal substitution elasticities and rates of time preference.We use a new and much larger dataset than Barsky et al. Furthermore, we estimate structural models of intertemporal choice, while parameterizing the parameters of interest as a function of relevant individual characteristics.We also consider lobehaviorallc extensions, like habit formation.Models with habit formation appear to be superior to models with intertemporally additive preferences.consumer choice;econometric models