This paper investigates the presence and strength of internal and external habit formation in consumption, using monthly household data. The habit hypothesis is used to explain empirical regularities in macroeconomics and finance. Empirical studies based on aggregate data (macro-evidence) leave...

We demonstrate that interpersonal comparisons lead to "keeping up with the Joneses"-behavior. Using annual household data from the German Socio-Economic Panel, we estimate the causal effect of changes in reference consumption, defined as the consumption level of all households who are perceived...

We demonstrate that upward-looking comparisons induce "keeping up with the richer Joneses"-behavior. Using data from the German Socio-Economic Panel, we estimate the effect of reference consumption, defined as the consumption level of all households who are perceived to be richer, on household...