Consumption Network Effects

Giacomo De Giorgi, Anders Frederiksen () and Luigi Pistaferri

No 22357, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we study consumption network effects. Does the consumption of our peers affect our own consumption? How large is such effect? What are the economic mechanisms behind it? We use long panel data on the entire Danish population to construct a measure of consumption based on administrative tax records on income and assets. We combine tax record data with matched employer-employee data so that we can construct peer groups based on workplace, which gives us a much tighter, precise, and credible definition of networks than used in previous literature. We use the available data to construct peer groups that do not perfectly overlap, and as such provide valid instruments derived from the network structure of one's peers group. The longitudinal nature of our data also allow us to estimate fixed effects models, which help us tackle reflection, self-selection, and common-shocks issues all at once. We estimate non-negligible and statistically significant endogenous and exogenous peer effects. Estimated effects are quite relevant for policies as they generate non-negligible multiplier effect. We also investigate what mechanisms generate such effects, distinguishing between "keeping up with the Joneses", a status model, and a more traditional risk sharing view.

JEL-codes: D12 D91 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-net, nep-pay, nep-soc and nep-ure
Note: EFG LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published as Giacomo De Giorgi & Anders Frederiksen & Luigi Pistaferri, 2020. "Consumption Network Effects," The Review of Economic Studies, vol 87(1), pages 130-163.

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Related works:
Journal Article: Consumption Network Effects (2020)
Working Paper: Consumption Network Effects (2018)
Working Paper: Consumption Network Effects (2016)
Working Paper: Consumption Network Effects (2016)
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