Conspicuous consumption and household indebtedness

Kwan Ok Lee and Masaki Mori

Real Estate Economics, 2021, vol. 49, issue S2, 557-586

Abstract: Using a novel, large data set of consumer transactions in Singapore, we study how conspicuous consumption affects household indebtedness. The coexistence of private housing (condominiums) and subsidized public housing (Housing Development Board [HDB]) allows us to identify conspicuous consumers. Conditional on income and other socioeconomic characteristics, those who choose to reside in condominiums—considered a status good in Singapore—are likely to be more conspicuous than their counterparts living in HDB units. We find that condominium residents spend considerably more (by 25%) on conspicuous goods but not differently on inconspicuous goods. Compared with their matched HDB counterparts, these consumers with higher conspicuous motivation carry 7% more credit card debt and 108% more delinquent credit card debt. Our results suggest that status‐seeking‐induced conspicuous consumption is an important determinant of household indebtedness.

Date: 2021
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https://doi.org/10.1111/1540-6229.12305

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