Consumption Network Effects

Giacomo De Giorgi

No 692, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: In this paper we study consumption network e¤ects. Does the consumption of our peers a¤ect our own consumption? How large is such e¤ect? 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 de nition 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 ones peers group. The longitudinal nature of our data also allow us to estimate xed e¤ects models, which help us tackle reection, self-selection, and common-shocks issues all at once. We estimate non-negligible and statistically signi cant endogenous and exogenous peer e¤ects. Estimated e¤ects are quite relevant for policies as they generate non-negligible multiplier e¤ect. We also investigate what mechanisms generate such e¤ects, distinguishing between "keeping up with the Joneses", a status model, and a more traditional risk sharing view.

Date: 2018
New Economics Papers: this item is included in nep-net, nep-pay, nep-soc and nep-ure
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Related works:
Journal Article: Consumption Network Effects (2020)
Working Paper: Consumption Network Effects (2016)
Working Paper: Consumption Network Effects (2016)
Working Paper: Consumption Network Effects (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:692

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