Conspicuous consumption and income inequality

The nature of conspicuous consumption can be understood by exploring the channels through which income inequality affects conspicuous consumption. We develop a simple model where comparison references are determined through social interactions and demonstrate: (1) a negative relationship between income inequality and the average level of conspicuous consumption; and (2) a positive relationship between income inequality and the variance of conspicuous consumption. We empirically test these hypotheses using US state-level panel data. We find that a one-standard-deviation increase in the Gini coefficient decreases households' conspicuous expenditure by about 5%. We also find that higher income inequality increases between-household inequality in conspicuous expenditure.
Publisher
Oxford University Press
Issue Date
2017-10
Language
English
Keywords

HEALTH-CARE EXPENDITURES; LUXURY; MARKET

Citation

Oxford Economic Papers, v.69, no.4, pp.870 - 896

ISSN
0030-7653
DOI
10.1093/oep/gpw060
URI
http://hdl.handle.net/10203/226618
Appears in Collection
MT-Journal Papers(저널논문)
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