Premium
CONSPICUOUS SPENDING AND THE INCOME DISTRIBUTION OF SOCIAL GROUPS
Author(s) -
Chai Andreas,
Kaus Wolfhard,
Kiedaisch Christian
Publication year - 2019
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12756
Subject(s) - economics , distribution (mathematics) , clothing , income distribution , demographic economics , household income , labour economics , inequality , geography , mathematical analysis , mathematics , archaeology
Using South African household expenditure data, we analyze how the spending of a household on visible goods, such as jewelry and clothes, depends on the distribution of income within its social group. We find that this spending is positively correlated with the share of peers who possess a similar income level to the household, what we dub the “local income share.” Moreover, we find that the spending of a household on visible goods is positively correlated with the average income of peers that are poorer than this household. We interpret this as evidence for cascade effects through which income changes among the poorest in the social group can trigger adjustments in the visible spending patterns of the wealthy. In line with previous research (Charles et al. 2009), we also find that visible spending of a household is negatively correlated with the average income of its social group. We present a simple model of status competition based on Hopkins and Kornienko (2004) that synthesizes these effects and can account for our results. ( JEL D12, D31, O12)