Visible Consumption, Income Inequality and Social Comparisons. Evidence from Four Latin American CountriesFootnote

1 We are very grateful for the comments and suggestions provided by Guillermo Alves, Veronica Amarante, Ana Fascioli, Robert Frank, Ignacio Munyo, Ori Heffetz, Juan Olano, Ambra Poggi, Gustavo Pereira, Agustín Reyes, Analía Rivero, Andrés Rius, Gonzalo Salas two anonymous referees, and attendants to Seminario del Instituto de Economia attendants to the meetings of the Human Development and Capabilities Association in Athens and Asociacion Latinoamericana y del Caribe para el Estudio de las Capacidades Humanas in Lima. All errors remain our own.

References

• Akay, A., Martinsson, P., & Medhin, H. (2012). Does positional concern matter in poor societies? Evidence from a survey experiment in rural Ethiopia. World Development, 40(2), 428–435. doi:10.1016/j.worlddev.2011.06.004
   Web of Science ®Google Scholar
• Alpizar, F., Carlsson, F., & Johansson-Stenman, O. (2005). How much do we care about absolute versus relative income and consumption. Journal of Economic Behavior & Organization, 56(3), 405–421. doi:10.1016/j.jebo.2002.10.007
   Web of Science ®Google Scholar
• Alvaredo, F., & Gasparini, L. (2015). Recent trends in inequality and poverty in developing countries. In Atkinson, A.B. and Bourguignon, F. (Eds.), Handbook of income distribution (Vol. 2, pp. 697–805). North Holland, Amsterdam: Elsevier.
   Google Scholar
• Banks, J., Blundell, R., & Lewbel, A. (1997). Quadratic Engel curves and consumer demand. Review of Economics and Statistics, 79(4), 527–539. doi:10.1162/003465397557015
   Web of Science ®Google Scholar
• Baudrillard, J. (2009). La sociedad de consumo. (1st ed., in French: 1970). Madrid: Siglo XXI Editores.
   Google Scholar
• Bertrand, M., & Morse, A. (2016). Trickle-down consumption. Review of Economics and Statistics, 98(5), 863–879. doi:10.1162/REST_a_00613
   Web of Science ®Google Scholar
• Bilancini, E., & Boncinelli, L. (2012). Redistribution and the notion of social status. Journal of Public Economics, 96(9-10), 651–657. doi:10.1016/j.jpubeco.2012.05.007
   Web of Science ®Google Scholar
• Bound, J., Jaeger, D. A., & Baker, R. M. (1995). Problems with instrumental variables estimation when the correlation between the instruments and the endogenous explanatory variable is weak. Journal of the American Statistical Association, 90(430), 443–450. doi:10.1080/01621459.1995.10476536
   Web of Science ®Google Scholar
• Bourdieu, P. (2002). La distinción. Criterio y bases sociales del buen gusto (1st ed., in French: 1979). Madrid: Editorial Taurus.
   Google Scholar
• Bowles, S., & Park, Y. (2005). Emulation, inequality, and work hours: Was Thorsten Veblen right? The Economic Journal, 115(507), F397–F412. doi:10.1111/j.1468-0297.2005.01042.x
   Web of Science ®Google Scholar
• Calvo, G. A. (1996). Capital flows and macroeconomic management: Tequila lessons. International Journal of Finance & Economics, 1(3), 207–223. doi:10.1002/(SICI)1099-1158(199607)1:3<207::AID-IJFE21>3.0.CO;2-3
   Google Scholar
• Cameron, A. C., & Trivedi, P. K. (2005). Microeconometrics: methods and applications. New York: Cambridge University Press.
   Google Scholar
• Carlsson, F., Gupta, G., & Johansson-Stenman, O. (2008). Keeping up with the Vaishyas? Caste and relative standing in India. Oxford Economic Papers, 61(1), 52–73. doi:10.1093/oep/gpn015
   Web of Science ®Google Scholar
• Carlsson, F., Khanh Nam, P., Linde-Rahr, M., & Martinsson, P. (2007). Are Vietnamese farmers concerned with their relative position in society? The Journal of Development Studies, 43(7), 1177–1188. doi:10.1080/00220380701526303
   Web of Science ®Google Scholar
• Carlsson, F., Daruvala, D., & Henrik, J. (2008). Value of Statistical Life and Cause of Accident: A Choice Experiment. Working Papers in Economics 332, University of Gothenburg, Department of Economics.
   Google Scholar
• Chai, A., Kaus, W., & Kiedaisch, C. (2019). Conspicuous spending and the income distribution of social groups. Economic Inquiry, 57(3), 1324–1341. doi:10.1111/ecin.12756
   Web of Science ®Google Scholar
• Charles, K. K., Hurst, E., & Roussanov, N. (2009). Conspicuous consumption and race. Quarterly Journal of Economics, 124(2), 425–467. doi:10.1162/qjec.2009.124.2.425
   Web of Science ®Google Scholar
• Clark, A. E., & Oswald, A. J. (1996). Satisfaction and comparison income. Journal of Public Economics, 61(3), 359–381. doi:10.1016/0047-2727(95)01564-7
   Web of Science ®Google Scholar
• Clark, A., Frijters, P., & Shields, M. (2008). Relative income, happiness, and utility: An explanation for the Easterlin Paradox and other puzzles. Journal of Economic Literature, 46(1), 95–144. doi:10.1257/jel.46.1.95
   Web of Science ®Google Scholar
• Cortina, A. (2002). Por una ética del consumo. Madrid: Taurus.
   Google Scholar
• De Melo, G. (2012). Essays on social interactions [Doctoral Dissertation]. University of Siena.
   Google Scholar
• Deaton, A., & Muellbauer, J. (1980). Economics and Consumer Behaviour. Cambridge: Cambridge University Press.
   Google Scholar
• Duesenberry, J. S. (1949). Income, saving and the theory of consumer behavior. Cambridge, MA: Harvard University Press.
   Google Scholar
• ECLAC. (2014). Pactos para la igualdad: Hacia un futuro sostenible. Santiago: ECLAC.
   Google Scholar
• Edwards, S., & Végh, C. A. (1997). Banks and macroeconomic disturbances under predetermined exchange rates. Journal of Monetary Economics, 40(2), 239–278. doi:10.1016/S0304-3932(97)00043-3
   Web of Science ®Google Scholar
• Ferrer-I-Carbonell, A. (2005). Income and wellbeing: An empirical analysis of the comparison income effect. Journal of Public Economics, 89(5-6), 997–1019. doi:10.1016/j.jpubeco.2004.06.003
   Web of Science ®Google Scholar
• Frank, R. (1999). Luxury fever: Why money fails to satisfy in an era of excess. New York: The Free Press.
   Google Scholar
• Frank, R. (1985). The demand for unobservable and other nonpositional goods. American Economic Review, 75(1), 101–116.
   Web of Science ®Google Scholar
• Frank, R. H., Levine, A. S., & Dijk, O. (2014). Expenditure Cascades. Review of Behavioral Economics, 1 (1-2), 55–73. doi:10.1561/105.00000003
   Google Scholar
• Galbraith, J. K. (1998). The affluent society. (1st edition: 1958). New York: Houghton Mifflin Harcourt.
   Google Scholar
• Glazer, A., & Konrad, K. A. (1996). A signaling explanation for charity. The American Economic Review, 86(4), 1019–1028.
   Web of Science ®Google Scholar
• Greenwood, J., Guner, N., Kocharkov, G., & Santos, C. (2014). Marry your like: Assortative mating and income inequality. American Economic Review, 104(5), 348–353. doi:10.1257/aer.104.5.348
   Web of Science ®Google Scholar
• Harriger-Lin, J., Khanna, N., & Pape, A. (2020). Conspicuous consumption and peer-group inequality: The role of preferences. The Journal of Economic Inequality, 18(3), 365–389. doi:10.1007/s10888-020-09447-6
   Web of Science ®Google Scholar
• Heffetz, O. (2011). A test of conspicuous consumption: Visibility and income elasticities. Review of Economics and Statistics, 93(4), 1101–1117. doi:10.1162/REST_a_00116
   Web of Science ®Google Scholar
• Heffetz, O., & Frank, R. (2011). Preferences for status: Evidence and economic implications. In Benhabib, J. Jackson, O., and Bisin, A. (Eds.), Handbook of social economics (Vol. 1A, pp. 69–91). The Netherlands: North-Holland.
   Google Scholar
• Hillesheim, I., & Mechtel, M. (2011). What makes us want to have more than others? Explaining relative consumption effects of public and private goods. University of Tübingen working papers in economics and finance, No. 4. http://nbn-resolving.de/urn:nbn:de:bsz:21-opus-55952
   Google Scholar
• Hirschman, A., & Rothschild, M. (1973). The changing tolerance for income inequality in the course of economic development with a mathematical appendix. The Quarterly Journal of Economics, 87(4), 544–566. doi:10.2307/1882024
   Web of Science ®Google Scholar
• Hopkins, E., & Kornienko, T. (2004). Running to keep in the same place: Consumer choice as a game of status. American Economic Review, 94(4), 1085–1107. doi:10.1257/0002828042002705
   Web of Science ®Google Scholar
• Kaus, W. (2013). Conspicuous consumption and race: Evidence from South Africa. Journal of Development Economics, 100(1), 63–73. doi:10.1016/j.jdeveco.2012.07.004
   Web of Science ®Google Scholar
• Leites, M., Salas, G., & Vigorito, V. (2019). ¿El consumo de qué bienes genera estatus? Evidencia en base a su visibilidad. Serie documentos de trabajo del Instituto de Economía.
   Google Scholar
• Leites, M., Paleo, C., Ramos, X., & Salas, G. (2022). Choosing or inheriting the joneses: The origins of reference groups. IZA Discussion Paper No. 15584. http://dx.doi.org/10.2139/ssrn.4232713
   Google Scholar
• Manski, R. (1993). Identification of endogenous social effects: The reflection problem. The Review of Economic Studies, 60(3), 531–542. doi:10.2307/2298123
   Web of Science ®Google Scholar
• Maurer, J., & Meier, A. (2008). Smooth it like the ‘Joneses’? Estimating peer‐group effects in intertemporal consumption choice. The Economic Journal, 118(527), 454–476. doi:10.1111/j.1468-0297.2007.02129.x
   Web of Science ®Google Scholar
• Oh, S. Y., Park, Y., & Bowles, S. (2012). Veblen effects, political representation, and the reduction in working time over the 20th century. Journal of Economic Behavior & Organization, 83(2), 218–242. doi:10.1016/j.jebo.2012.05.006
   Web of Science ®Google Scholar
• Ordabayeva, N., & Chandon, P. (2011). Getting ahead of the Joneses: When equality increases conspicuous consumption among bottom-tier consumers. Journal of Consumer Research, 38(1), 27–41. doi:10.1086/658165
   Web of Science ®Google Scholar
• Prebisch, R. (1984). Five stages in my thinking on development. In Meier G. and Seers D. (eds.), Pioneers in Development, Washington, D.C., World Bank.
   Google Scholar
• Rius, A., & Román, C. (2021). Countries in the hamster’s wheel?: Nurkse-Duesenberry demonstration effects and the determinants of saving. Cuadernos de Economía, 40(82), 193–225.
   Web of Science ®Google Scholar
• Roychowdhury, P. (2016). Visible inequality, status competition, and conspicuous consumption: Evidence from rural India. Oxford Economic Papers, 69(1), 36–54. doi:10.1093/oep/gpw056
   Web of Science ®Google Scholar
• Roychowdhury, P. (2019). Peer effects in consumption in India: An instrumental variables approach using negative idiosyncratic shocks. World Development, 114, 122–137. doi:10.1016/j.worlddev.2018.09.028
   Web of Science ®Google Scholar
• Schor, J. (1997). New analytic bases for an economic critique of the consumer society. In Goodwin, N. R., Ackerman, F., and Kiron, D. (Eds.), The consumer society (pp. 31–33). Washington, Island Press.
   Google Scholar
• Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87(3), 355–374. doi:10.2307/1882010
   Web of Science ®Google Scholar
• Thaler, R., & Sunstein, C. (2008). Nudge: Improving decisions about health, wealth, and happiness. New Haven: Yale University Press.
   Google Scholar
• Veblen, T. (1899). Theory of the leisure class: An economic study in the evolution of institutions. New York: Macmillan.
   Google Scholar
• Vendrik, M., & Woltjer, G. (2007). Happiness and loss aversion: Is utility concave or convex in relative income? Journal of Public Economics, 91(7-8), 1423–1448. doi:10.1016/j.jpubeco.2007.02.008
   Web of Science ®Google Scholar