Non-separable time preferences, novelty consumption and body weight: Theory and evidence from the East German transition to capitalism

Abstract

This paper develops a dynamic model to illustrate how diet and body weight change when novel food products become available to consumers. We propose a microfounded test to empirically discriminate between habit and taste formation in intertemporal preferences. Moreover, we show that 'novelty consumption' and endogenous preferences can explain the persistent correlation between economic development and obesity. By empirically studying the German reunification, we find that East Germans consumed more novel Western food and gained more weight than West Germans when a larger variety of food products became readily accessible after the fall of the Wall. The observed consumption patterns suggest that food consumption features habit formation.

Keywords: Economic development; Endogenous preferences; Food consumption; German reunification; Habit formation; Novel goods; Obesity.