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Conspicuous Consumption and Communism: Evidence from East and West Germany

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  • Tim Friehe
  • Mario Mechtel

Abstract

This paper investigates the influence of the political regime on the relative importance of conspicuous consumption. We use the separation of Germany into the communist GDR and the democratic FRG and its reunification in 1990 as a natural experiment. Relying on household data that are representative for Germany, our empirical results strongly indicate that conspicuous consumption is relatively more important in East Germany. Importantly, a significant gap in conspicuous consumption expenditures remains even 18 years after the reunification.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-08/cesifo1_wp3922.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3922.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3922

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Keywords: conspicuous consumption; status-seeking; relative income; political regime; behavioral economics;

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Cited by:
  1. Tim Friehe & Mario Mechtel, 2014. "Statuskonsum in Ost- und Westdeutschland: Beeinflusst durch das politische Regime?," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 21(03), pages 31-36, 06.
  2. Tim Friehe & Mario Mechtel, 2013. "Gambling to Leapfrog in Status?," CESifo Working Paper Series 4174, CESifo Group Munich.

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