Conspicuous Consumption in the United States and China

David Jinkins

No 8323, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: I develop a model of conspicuous consumption to empirically measure the importance of peer beliefs to Americans and Chinese. In the model, a consumer cares not only about the direct utility she receives from consumption, but also about the way her consumption pattern affects her peer group's belief about her well-being. I estimate the model on household budget surveys. According to model estimates, a Chinese consumer cares 20% more than an American consumer about peer beliefs. The absolute size of the conspicuous consumption motive in both countries is relatively small. I use the estimated model to evaluate the welfare effect of the 1990-2002 American luxury tax on automobiles. The luxury tax benefited nearly all Americans a small amount, but hurt the small fraction of consumers who love automobiles the most.

Keywords: behavioral economics; conspicuous consumption; applied microeconomics (search for similar items in EconPapers)
JEL-codes: D12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-07
New Economics Papers: this item is included in nep-cna, nep-pke and nep-tra
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Journal Article: Conspicuous consumption in the United States and China (2016)
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