IDEAS home Printed from https://ideas.repec.org/a/aea/aejpol/v13y2021i2p1-25.html

Thy Neighbor's Misfortune: Peer Effect on Consumption

Author

Listed:
  • Sumit Agarwal
  • Wenlan Qian
  • Xin Zou

Abstract

Using a large, representative sample of credit and debit card transactions in Singapore, this paper studies the consumption response of individuals whose same-building neighbors experienced personal bankruptcy. The unique bankruptcy rules in Singapore suggest liquidity shocks drive personal bankruptcy decisions, leading to a substantial drop in consumption for the bankrupt. Peers' monthly card consumption decreases by 3.4 percent over the 1-year postbankruptcy period. There exists no consumption decrease among individuals in immediately adjacent buildings nor for consumers with diminished postevent social ties with the bankrupt. The findings imply a significant social multiplier effect of 2.8 times the original consumption shock.

Suggested Citation

  • Sumit Agarwal & Wenlan Qian & Xin Zou, 2021. "Thy Neighbor's Misfortune: Peer Effect on Consumption," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 1-25, May.
    • Handle: RePEc:aea:aejpol:v:13:y:2021:i:2:p:1-25
    DOI: 10.1257/pol.20170634
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/pol.20170634
    Download Restriction: no
    File URL: https://doi.org/10.3886/E119962V2
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/pol.20170634.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/pol.20170634.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/pol.20170634?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-373, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aruni Mitra & Ronit Mukherji, 2026. "Class, caste and conspicuous consumption in India," Economica, London School of Economics and Political Science, vol. 93(370), pages 439-467, April.
    2. Omer Gokcekus & Yui Suzuki, 2014. "Is there a Corruption-effect on Conspicuous Consumption?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 8(3), pages 215-235, August.
    3. Banuri, Sheheryar & Nguyen, Ha, 2023. "Borrowing to keep up (with the Joneses): Inequality, debt, and conspicuous consumption," Journal of Economic Behavior & Organization, Elsevier, vol. 206(C), pages 222-242.
    4. Gilat Levy & Ronny Razin, 2015. "Preferences over Equality in the Presence of Costly Income Sorting," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 308-337, May.
    5. Friedrichsen, Jana & König, Tobias & Schmacker, Renke, 2018. "Social image concerns and welfare take-up," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 168, pages 174-192.
    6. Asali, Muhammad & Abu-Qarn, Aamer & Beenstock, Michael, 2024. "Violence and cooperation in geopolitical conflicts: Evidence from the Second Intifada," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 261-286.
    7. Policardo, Laura & Sanchez Carrera, Edgar J., 2024. "Wealth inequality and economic growth: Evidence from the US and France," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    8. Christopher P. Roth, 2014. "Conspicuous Consumption and Peer Effects among the Poor: Evidence From a Field Experiment," Economics Series Working Papers WPS/2014-29, University of Oxford, Department of Economics.
    9. Friedrichsen, Jana, 2018. "Signals Sell: Product Lines when Consumers Differ Both in Taste for Quality and Image Concern," Rationality and Competition Discussion Paper Series 70, CRC TRR 190 Rationality and Competition.
    10. Xiaonan Guo & Xiaomeng Ren & Jinchuan Shi, 2025. "Human Capital and Conspicuous Consumption," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 33(5), pages 113-138, September.
    11. repec:osf:socarx:vjz2q_v1 is not listed on IDEAS
    12. Kaus, Wolfhard, 2013. "Conspicuous consumption and “race”: Evidence from South Africa," Journal of Development Economics, Elsevier, vol. 100(1), pages 63-73.
    13. David Clingingsmith & Roman M. Sheremeta, 2018. "Status and the demand for visible goods: experimental evidence on conspicuous consumption," Experimental Economics, Springer;Economic Science Association, vol. 21(4), pages 877-904, December.
    14. Sager, Lutz, 2019. "Income inequality and carbon consumption: Evidence from Environmental Engel curves," Energy Economics, Elsevier, vol. 84(S1).
    15. Vivek Jadhav & Sacchidananda Mukherjee, 2024. "Interplay of Status Perception, Visible Inequality, Conspicuous Consumption, and Food Expenditure: Evidence from Consumer Pyramid Household Survey of Indian Households," Economic Papers, The Economic Society of Australia, vol. 43(4), pages 342-369, December.
    16. Sung-Ha HwangBy & Jungmin Lee, 2017. "Conspicuous consumption and income inequality," Oxford Economic Papers, Oxford University Press, vol. 69(4), pages 870-896.
    17. Alex Imas & Kristóf Madarász, 2021. "Mimetic Dominance and the Economics of Exclusion: Private Goods in Public Context," Working Papers 2021-001, Human Capital and Economic Opportunity Working Group.
    18. Omer Moav and & Zvika Neeman, 2012. "Saving Rates and Poverty: The Role of Conspicuous Consumption and Human Capital," Economic Journal, Royal Economic Society, vol. 122(563), pages 933-956, September.
    19. Kim, Woojin, 2022. "Television and American consumerism," Journal of Public Economics, Elsevier, vol. 208(C).
    20. Vivek Jadhav, 2026. "Visible inequality, status competition, and the veblen–engel trade off: evidence on conspicuous and essential consumption from Indian households," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 73(1), pages 1-26, June.
    21. Friedrichsen, Jana, 2016. "Signals sell: Designing a product line when consumers have social image concerns," Discussion Papers, Research Unit: Market Behavior SP II 2016-202, WZB Berlin Social Science Center.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejpol:v:13:y:2021:i:2:p:1-25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.