Relative Concerns for Consumption at the Top: An Intertemporal Analysis for the UK

Climent Quintana-Domeque and Johannes Wohlfart ()
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Johannes Wohlfart: University of Cologne

No 8502, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates whether the consumption of rich households provides a reference point in the consumption choices of non-rich households from an intertemporal perspective. Using UK household data on food consumption, we estimate the Euler equation implied by a life-cycle model incorporating relative concerns for the consumption of rich households. According to both our OLS and GMM estimates, for the population of non-rich individuals as a whole, there is no evidence of such relative concerns. These results are robust to alternative definitions of the reference group, the presence of exogenous effects and liquidity constraints, and the interval censoring nature of our food consumption data. However, we find some (correlational) evidence of heterogeneous effects across county and household characteristics, which is robust to simultaneous estimation. In particular, there are relative concerns (for consumption at the top) in counties with relatively low income inequality or relatively high population density. Households whose head has relatively low educational attainment are also subject to relative concerns for consumption at the top.

Keywords: trickle-down consumption; inequality; keeping up with the Joneses; UK (search for similar items in EconPapers)
JEL-codes: D12 D91 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2014-09
New Economics Papers: this item is included in nep-dem
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Citations: View citations in EconPapers (1)

Published - revised version published in: Journal of Economic Behavior and Organization, 2016, 129, 172-194.

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Journal Article: “Relative concerns for consumption at the top”: An intertemporal analysis for the UK (2016)
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