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Consumption and Social Identity: Evidence from India

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  • Khamis, Melanie

    ()
    (Wesleyan University)

  • Prakash, Nishith

    ()
    (University of Connecticut)

  • Siddique, Zahra

    ()
    (University of Reading)

Abstract

We examine spending on consumption items which have signaling value in social interactions across groups with distinctive social identities in India, where social identities are defined by caste and religious affiliations. The classification of such items was done by eliciting responses to a survey in India. We match the results of our survey with nationally representative micro data on household consumption expenditures. We find that disadvantaged caste groups such as Other Backward Castes spend nine percent more on visible consumption than Brahmin and High Caste groups while social groups such as Muslims spend eleven percent less, after controlling for differences in permanent income and demographic composition of households. These differences are significant and robust. Additionally, we find that these differences can be partly explained as a result of the status signaling nature of such consumption items.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5406.

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Length: 40 pages
Date of creation: Dec 2010
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization, 2012, 83 (3), 353 - 371
Handle: RePEc:iza:izadps:dp5406

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Keywords: consumption; households; India;

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  1. Banerjee, Abhijit & Duflo, Esther, 2006. "The Economic Lives of the Poor," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5968, C.E.P.R. Discussion Papers.
  2. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2007. "Conspicuous Consumption and Race," NBER Working Papers 13392, National Bureau of Economic Research, Inc.
  3. Glazer, Amihai & Konrad, Kai A, 1996. "A Signaling Explanation for Charity," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 1019-28, September.
  4. Kuhn, Peter J. & Kooreman, Peter & Soetevent, Adriaan R. & Kapteyn, Arie, 2010. "The Effects of Lottery Prizes on Winners and their Neighbors: Evidence from the Dutch Postcode Lottery," IZA Discussion Papers 4950, Institute for the Study of Labor (IZA).
  5. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 349-73, June.
  6. Francis Bloch & Vijayendra Rao & Sonalde Desai, 2004. "Wedding Celebrations as Conspicuous Consumption: Signaling Social Status in Rural India," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
  7. Basu, Kaushik, 1989. "A Theory of Association: Social Status, Prices and Markets," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 653-71, October.
  8. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, number veblen1899.
  9. Siddique, Zahra, 2011. "Evidence on Caste Based Discrimination," Labour Economics, Elsevier, Elsevier, vol. 18(S1), pages S146-S159.
  10. Moav, Omer & Neeman, Zvika, 2008. "Conspicuous Consumption, Human Capital and Poverty," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6864, C.E.P.R. Discussion Papers.
  11. Ori Heffetz, 2011. "A Test of Conspicuous Consumption: Visibility and Income Elasticities," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1101-1117, November.
  12. Robert H. Frank, 2005. "Positional Externalities Cause Large and Preventable Welfare Losses," American Economic Review, American Economic Association, American Economic Association, vol. 95(2), pages 137-141, May.
  13. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, Elsevier, vol. 53(1), pages 91-110, January.
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Cited by:
  1. Xavier Fontaine & Katsunori Yamada, 2013. "Caste Comparisons: Evidence from India," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0867, Institute of Social and Economic Research, Osaka University.

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