Who cares about relative status? A quantile approach to consumption of relative house size

ABSTRACT

I estimate the willingness to pay (WTP) to live in a house near neighbours with relatively smaller (or larger) houses using housing transaction data. I find that consumers in the 50^th and 75^th percentile are willing to pay the most for an increase in relative housing consumption while consumers in the lower percentiles and the highest percentile yield a smaller, and statistically insignificant, WTP. This gives evidence to popular media reports that the middle class values relative status the most.

KEYWORDS:

• Relative status
• housing markets
• envy

JEL CLASSIFICATION:

• Z13
• R30

Notes

¹ There is also evidence that consumers in the highest income brackets favour status symbols that are recognizable only to other high consuming individuals (i.e. expensive purses without obvious name labels) (Han, Nunes, and Dreze 2010).

² The samples used to calculate include to ensure the spatial lag is based on actual neighbours in the original sample, not the bootstrap sample.

³ Calculated variables are taken following Leguizamon (2010) and Leguizamon and Ross (2012).

⁴ WTP is calculated by where is the variable coefficient of interest, is the spatial influence of the nearest neighbours’ house price and is the average house price.