Lagging behind the Joneses: Relative Deprivation and Household Consumption in Rural China

Xiaodi Qin, Haitao Wu (), Yifeng Xie and Xiaofang Zhang
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Xiaodi Qin: School of Business Administration, Zhongnan University of Economics and Law, Wuhan 430073, China
Haitao Wu: School of Business Administration, Zhongnan University of Economics and Law, Wuhan 430073, China
Yifeng Xie: School of Business Administration, Zhongnan University of Economics and Law, Wuhan 430073, China
Xiaofang Zhang: School of Business Administration, Zhongnan University of Economics and Law, Wuhan 430073, China

Agriculture, 2022, vol. 12, issue 11, 1-14

Abstract: Based on the Chinese Family Panel Studies (CFPS) 2010–2018, this article investigates how relative deprivation influences household consumption in rural China. High-dimensional fixed-effects (HDFE), the instrumental variable (IV), and causal mediation analysis (CMA) are leveraged to estimate the causal effect and mechanisms. Results show that relative deprivation reduces survival-oriented consumption of food, development-oriented consumption of transportation, telecommunication, and education, as well as enjoyment-oriented of durable goods, and increases survival-oriented consumption of residence and development-oriented consumption of healthcare and medical services. Mechanism analysis indicates that relative deprivation decreases household consumption through the anticipated effect and increases it through a cognitive trap effect. On the whole, the anticipated effect prevails over the cognitive trap effect.

Keywords: relative deprivation; rural consumption; income uncertainty; precautionary savings; cognitive ability (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2022
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