Do positional goods inhibit saving? Evidence from a life-cycle experiment

Nick Feltovich and Ourega-Zoé Ejebu

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PB, 440-454

Abstract: We investigate the effect of positional goods (goods for which one's consumption relative to others’ matters) on saving, based on results from a life-cycle consumption/saving experiment. In a Group treatment, we allow inter-personal comparisons by assigning subjects to groups and displaying rankings based partly on consumption. A baseline Individual treatment is similar, but without the additional information. We find more under-saving (saving less than the optimal amount), and lower money earnings for subjects, in the Group treatment. Both effects are economically relevant, with magnitudes of roughly 6–7% of expected income and 7–8% of average earnings respectively. Additional analysis shows that the result is driven by those subjects who are not ranked in the top three in their group (“keeping up with the Joneses”), and males in particular.

Keywords: Consumption; Precautionary saving; Inter-personal comparisons; Positional goods; Experiment (search for similar items in EconPapers)
JEL-codes: D03 D14 D91 E21 G02 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pb:p:440-454

DOI: 10.1016/j.jebo.2014.01.015

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