Borrowing to keep up (with the Joneses): Inequality, debt, and conspicuous consumption

Sheheryar Banuri and Ha Nguyen

Journal of Economic Behavior & Organization, 2023, vol. 206, issue C, 222-242

Abstract: The quest for status is a powerful motivator, but does it affect inequality? This paper presents a novel lab experiment that was designed and conducted to identify the relationship between conspicuous consumption, access to credit, and inequality. We report four main findings: First, consumption increases when it is “conspicuous” (i.e., is both observable and signaling ability). Second, costly borrowing increases when consumption is conspicuous. Third, the increase in costly borrowing is driven by those at lower income levels. Finally, in the presence of conspicuous consumption, access to credit exacerbates inequality.

Keywords: Inequality; Socioeconomic status; Conspicuous consumption; Veblen goods; Access to credit (search for similar items in EconPapers)
JEL-codes: C92 D14 G4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Borrowing to Keep Up (with the Joneses): Inequality, Debt, and Conspicuous Consumption (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:206:y:2023:i:c:p:222-242

DOI: 10.1016/j.jebo.2022.12.001

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