Deep habits in consumption of the Russian households

Abstract

In this paper, we test the hypothesis of deep habits in consumption. We estimate the Euler equation for the food consumption and other non-durables separately. For the estimation, we use the generalized method of moments (GMM) and run it for the panel household survey «The Russia Longitudinal Monitoring Survey -Higher School of Economics» (RLMS-HSE). Estimation results support two main conclusions. Firstly, habits persistence estimates are significantly different from zero and, hence, the hypothesis of habits in consumption is supported by the data. And secondly, habits persistence is different for the food consumption and other nondurables and, hence, the hypothesis of deep habits in consumption is supported by the data as well.