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Conspicuous consumption and political regimes: Evidence from East and West Germany

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  • Friehe, Tim
  • Mechtel, Mario

Abstract

This paper investigates the influence of political regimes on the relative importance of conspicuous consumption. We use the division 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. Significantly, although we find some convergence, a considerable gap in conspicuous consumption expenditures remains even 18 years after the German reunification.

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  • Friehe, Tim & Mechtel, Mario, 2014. "Conspicuous consumption and political regimes: Evidence from East and West Germany," European Economic Review, Elsevier, vol. 67(C), pages 62-81.
  • Handle: RePEc:eee:eecrev:v:67:y:2014:i:c:p:62-81 DOI: 10.1016/j.euroecorev.2014.01.005
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    3. Tim Friehe & Mario Mechtel, 2017. "Gambling to leapfrog in status?," Review of Economics of the Household, Springer, vol. 15(4), pages 1291-1319, December.
    4. Jinkins, David, 2016. "Conspicuous consumption in the United States and China," Journal of Economic Behavior & Organization, Elsevier, vol. 127(C), pages 115-132.
    5. Görges, Luise & Beblo, Miriam, 2015. "Breaking down the wall between nature and nurture: An exploration of gendered work preferences in East and West Germany," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112825, Verein für Socialpolitik / German Economic Association.
    6. Pannenberg, Markus & Friehe, Tim, 2017. "Time preferences and political regimes: Evidence from reunified Germany," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168173, Verein für Socialpolitik / German Economic Association.
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    8. König, Tobias & Lausen, Tobias, 2016. "Relative consumption preferences and public provision of private goods," Discussion Papers, Research Unit: Market Behavior SP II 2016-213, Social Science Research Center Berlin (WZB).
    9. Dragone, D. & Ziebarth, N.R., 2015. "Non-Separable Time Preferences and Novelty Consumption: Theory and Evidence from the East German Transition to Capitalism," Health, Econometrics and Data Group (HEDG) Working Papers 15/28, HEDG, c/o Department of Economics, University of York.
    10. Tim Friehe & Mario Mechtel & Markus Pannenberg, 2014. "Positional Income Concerns: Prevalence and Relationship with Personality and Economic Preferences," IAAEU Discussion Papers 201411, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
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    12. Tim Friehe & Markus Pannenberg & Michael Wedow, 2015. "Let Bygones Be Bygones? Socialist Regimes and Personalities in Germany," SOEPpapers on Multidisciplinary Panel Data Research 776, DIW Berlin, The German Socio-Economic Panel (SOEP).
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    16. König, Tobias & Lausen, Tobias, 2017. "Relative Consumption Preferences and Public Provision of Private Goods," Rationality and Competition Discussion Paper Series 18, CRC TRR 190 Rationality and Competition.
    17. Dragone, Davide & Ziebarth, Nicolas R., 2015. "Economic Development, Novelty Consumption, and Body Weight: Evidence from the East German Transition to Capitalism," IZA Discussion Papers 8967, Institute for the Study of Labor (IZA).
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    19. Rösel, Felix, 2016. "The Persistency of Public Debt," Annual Conference 2016 (Augsburg): Demographic Change 145595, Verein für Socialpolitik / German Economic Association.
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    21. Dragone, Davide & Ziebarth, Nicolas R., 2017. "Non-separable time preferences, novelty consumption and body weight: Theory and evidence from the East German transition to capitalism," Journal of Health Economics, Elsevier, vol. 51(C), pages 41-65.

    More about this item

    Keywords

    Conspicuous consumption; Status-seeking; Political regime; Behavioral economics;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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