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Beliefs about whether spending implies wealth

Heather Barry Kappes, Joe J. Gladstone and Hal H. Hershfield

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Spending is influenced by many factors. One that has received little attention is the meaning that people give to the act of spending. Spending money might imply that someone is relatively wealthy—since they have money to spend—or relatively poor—since spending can deplete assets. We show that people differ in the extent to which they believe that spending implies wealth (SIW beliefs). We develop a scale to measure these beliefs and find that people who more strongly believe that SIW spend their own money relatively lavishly and are, on average, more financially vulnerable. We find correlational evidence for these relationships using objective financial-transaction data, including over 2 million transaction records from the bank accounts of over 2,000 users of a money management app, as well as self-reported financial well-being. We also find experimental evidence by manipulating SIW beliefs and observing causal effects on spending intentions. These results show how underlying beliefs about the link between spending and wealth play a role in consumption decisions, and point to beliefs about the meaning of spending as a fruitful direction for further research.

Keywords: consumer finance; financial beliefs; financial vulnerability; financial fragility; conspicuous consumption (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2020-12-12
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Published in Journal of Consumer Research, 12, December, 2020, 48(1). ISSN: 0093-5301

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