How Much Do We Care About Absolute Versus Relative Income and Consumption?

Francisco Alpizar Rodriguez, Fredrik Carlsson and Olof Johansson-Stenman ()

No 63, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: We find, using survey-experimental methods, that most individuals are concerned with both relative income and relative consumption of particular goods. The degree of concern varies in the expected direction depending on the properties of the good. However, contrary to what has been suggested in the previous literature, we find that relative consumption is also important for vacation and insurance, which are typically seen as non-positional goods. Further, absolute consumption is also found to be important for cars and housing, which are widely regarded as highly positional. Implications for Pareto-efficient taxation are illustrated using the results from the experiment.

Keywords: status; relative income; optimal taxes; experiments (search for similar items in EconPapers)
JEL-codes: C91 D63 H21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2001-11-14
New Economics Papers: this item is included in nep-lam, nep-ltv, nep-pbe and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Journal of Economic Behavior and Organization, 2005, pages 405-421.

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Journal Article: How much do we care about absolute versus relative income and consumption? (2005)
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