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Laura Blow

I am an applied microeconomist specialising in the analysis of individual behaviour. I currently work at the Institute for Fiscal Studies where I have combined policy-oriented work with academic research. I would now like to concentrate on the academic side of my work. At present, one of my areas of interest is the choice theoretic characterisation of non-standard models of behaviour including time inconsistent preferences, reference dependent preferences and mental accounting. Methodologically, my current focus is on the nonparametric restrictions on behaviour implied by revealed preference theory and the empirical implementation of these tests.

I also have an established research interest in consumption and demand more broadly. My research has included work on index numbers, the implications of price dispersion for poorer households, the effect of house prices on consumption, strategic consumption choices prior to marriage and the labelling effects of transfers.

  • Applied microeconomics
  • Consumer Choice Theory
  • Behavioural Economics

"Nonparametric Analysis of Time-Inconsistent Preferences"

Abstract

What are the necessary and sufficient nonparametric/revealed preference empirical conditions for quasi-hyperbolically discounted consumption behaviour? This paper explores this question for standard consumption data in the elementary, choice-revealed preference tradition of Samuelson (1948), Houthakker (1950) and Afriat (1967). We describe conditions for the leading forms of the model: the sophisticated agent who recognises his future behaviour will be at odds with his current wishes, and the naive agent who does not. We find, perhaps surprisingly, that, without further restrictions, the conditions for the data satisfying quasi-hyperbolic discounting (sophisticated or naive) are simply that they satisfy the generalised axiom of revealed preference (GARP). We explore what extra assumptions we can make in order to get additional restrictions beyond GARP.
We discuss how to implement tests of these restrictions and also how to make sensible empirical comparisons with alternative models including the standard exponential discounting model. The hyperbolic model or GARP necessarily fit the data at least as well as the exponential model because they are less restrictive, and so claiming a better fit is not a rational way to compare models. We consider this problem in some detail and suggest a different way of comparing models using their empirical informational content. We provide an empirical application investigating how the quasi-hyperbolic discounting model performs compared to the exponential model using a large, consumption panel data set.

  • Prof Sir Richard Blundell (UCL)
  • Prof Martin Browning (Oxford University)
  • Prof Ian Crawford (Oxford)
  • Dr Valerie Lechene (UCL)
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