Conspicuous Consumption and Race
AbstractUsing nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. We demonstrate that these differences exist among virtually all sub-populations, that they are relatively constant over time, and that they are economically large. While racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used to reflect a household's economic position relative to a reference group. Using merged data on race and state level income, we demonstrate that a key prediction of our model -- that visible consumption should be declining in mean reference group income -- is strongly borne out in the data separately for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption. We conclude with an assessment of the role of conspicuous consumption in explaining lower spending by racial minorities on items likes health and education, as well as their lower rates of wealth accumulation.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13392.
Date of creation: Sep 2007
Date of revision:
Note: AG EFG LS PE
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Other versions of this item:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-16 (All new papers)
- NEP-MIG-2007-09-16 (Economics of Human Migration)
- NEP-PKE-2007-09-16 (Post Keynesian Economics)
- NEP-URE-2007-09-16 (Urban & Real Estate Economics)
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