Being Well-in with the Joneses? A Lab-in-the-Field Experiment on Conspicuous Consumption among Rural Communities

Lena Kuhn, Ihtiyor Bobojonov and Laura Moritz

Journal of Development Studies, 2024, vol. 60, issue 6, 956-974

Abstract: Conspicuous consumption, specialised consumption of high visibility but without apparent economic benefit, is reducing investment in productive assets and thus hindering economic development in low-income countries. In previous research, the phenomenon was commonly explained by status-seeking and herding behaviour. Our study follows a novel angle in testing the role of risk sharing, assuming that investment into social status is perceived to increase access to informal credits in times of crises. We conduct a random-effects hurdle model along a lab-in-the-field experiment along a sample of 197 wheat farmers in Uzbekistan, a country characterised by high levels of risk and uncertainty. Within our experimental setup, both risk attitude and real-life risk management decision are found to be significant determinants of conspicuous consumption. Our findings support the notion of a complex decision-making process with risk sharing as one important motivator. Providing first empirical evidence on the topic, our findings have implications beyond our narrowly defined study case: We argue that strengthening options of formal risk-sharing tools might remove one of the motivators for conspicuous consumption; thus, it could improve the economic welfare of low-income households worldwide by allowing for more productive investment of scarce financial resources.

Date: 2024
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DOI: 10.1080/00220388.2024.2307038

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