IDEAS home Printed from https://ideas.repec.org/a/aea/aejpol/v13y2021i2p1-25.html
   My bibliography  Save this article

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. 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.
    2. Leonardo Bursztyn & Bruno Ferman & Stefano Fiorin & Martin Kanz & Gautam Rao, 2018. "Status Goods: Experimental Evidence from Platinum Credit Cards," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1561-1595.
    3. Tomer Blumkin & Spencer Bastani & Luca Micheletto, 2024. "Rethinking Commodity Taxation: The New StatusRedistribution Channel," Working Papers 2412, Ben-Gurion University of the Negev, Department of Economics.
    4. Khamis, Melanie & Prakash, Nishith & Siddique, Zahra, 2012. "Consumption and social identity: Evidence from India," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 353-371.
    5. Undurraga, Eduardo A. & Nica, Veronica & Zhang, Rebecca & Mensah, Irene C. & Godoy, Ricardo A., 2016. "Individual health and the visibility of village economic inequality: Longitudinal evidence from native Amazonians in Bolivia," Economics & Human Biology, Elsevier, vol. 23(C), pages 18-26.
    6. 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.
    7. 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.
    8. Valdez Gonzalez, Natalia I. & Kee, Jennifer Y. & Palma, Marco A. & Pruitt, J. Ross, 2024. "The relationship between monetary incentives, social status, and physical activity," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    9. Montano-Campos, Felipe & Perez-Truglia, Ricardo, 2019. "Giving to charity to signal smarts: evidence from a lab experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 193-199.
    10. 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.
    11. Elisa Macchi, 2022. "Worth your weight: experimental evidence on the benefits of obesity in low-income countries," ECON - Working Papers 401, Department of Economics - University of Zurich.
    12. Tomer Blumkin & Spencer Bastani & Michael Beenstock, 2023. "Violence and Cooperation in Geopolitical Conflicts: Evidence from the Second Intifada," Working Papers 2314, Ben-Gurion University of the Negev, Department of Economics.
    13. 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).
    14. 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.
    15. repec:hal:spmain:info:hdl:2441/1ej8deo44v9t38bpf73n3rflp8 is not listed on IDEAS
    16. 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.
    17. Alex Imas & Kristóf Madarász, 2020. "Mimetic Dominance and the Economics of Exclusion: Private Goods in Public Context," CESifo Working Paper Series 8435, CESifo.
    18. Ruslan Momot & Elena Belavina & Karan Girotra, 2020. "The Use and Value of Social Information in Selective Selling of Exclusive Products," Management Science, INFORMS, vol. 66(6), pages 2610-2627, June.
    19. Leonardo Bursztyn & Robert Jensen, 2017. "Social Image and Economic Behavior in the Field: Identifying, Understanding, and Shaping Social Pressure," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 131-153, September.
    20. repec:osf:socarx:vjz2q_v1 is not listed on IDEAS
    21. Kaus, Wolfhard, 2013. "Conspicuous consumption and “race”: Evidence from South Africa," Journal of Development Economics, Elsevier, vol. 100(1), pages 63-73.
    22. Pascal Courty & Merwan Engineer, 2019. "A pure hedonic theory of utility and status: Unhappy but efficient invidious comparisons," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(4), pages 601-621, August.

    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.