Long Term Effects of "Prosperity in Youth" on Consumption: Evidence from China

K. Sudhir () and Ishani Tewari
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K. Sudhir: Cowles Foundation & School of Management, Yale University, https://faculty.som.yale.edu/ksudhir/
Ishani Tewari: School of Management, Yale University

No 2025, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We test for the long-term impact of experiencing "prosperity in youth" (PIY) on non-traditional category consumption. Using unique twenty-year panel data of individuals from nine Chinese provinces with varying levels of per-capita GDP and rates of per-capita GDP growth, we find robust evidence for the PIY effect. We find both a direct effect of one�s own prosperity and an indirect effect of the prosperity of one�s province during youth on long-term consumption. In particular, the indirect PIY effect is driven more strongly by individuals with low incomes during youth � suggesting that norms and aspirations created by the consumption of non-traditional categories by the rich during one�s youth have significant impact on long-term consumption � almost the same magnitude as the direct effect. The analysis also highlights the importance of separating cohort effects from life cycle effects for taste based products. We highlight the marketing implications for non-traditional categories in emerging markets.

Keywords: Cohort effects; Lifecycle effects; Emerging markets; China; Prosperity in youth; Impressionable years hypothesis; Long-term effects (search for similar items in EconPapers)
JEL-codes: D12 F61 M31 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015-10
New Economics Papers: this item is included in nep-cna and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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