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Conspicuous consumption in the United States and China

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  • Jinkins, David

Abstract

How do differences in the motive for conspicuous consumption in the United States and China affect the incidence of taxes in those countries? In this paper I develop a model of conspicuous consumption in which a consumer cares not only about the direct utility she receives from consumption, but also about the way her consumption pattern affects her peer group's belief about her well-being. Estimating the model on American and Chinese data, I find that a Chinese consumer cares 20% more than an American consumer about peer beliefs. I use the estimated model in several experiments related to tax incidence. I find that the 1990–2002 American luxury tax on automobiles led to widespread but small welfare gains, and that the stronger Chinese motive for conspicuous consumption leads to fewer households harmed and larger median welfare gains from a 10% tobacco excise tax.

Suggested Citation

  • Jinkins, David, 2016. "Conspicuous consumption in the United States and China," Journal of Economic Behavior & Organization, Elsevier, vol. 127(C), pages 115-132.
    • Handle: RePEc:eee:jeborg:v:127:y:2016:i:c:p:115-132
    DOI: 10.1016/j.jebo.2016.03.018
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    Cited by:

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    2. Fan, Ying & Sing, Tien Foo, 2021. "Macroeconomic policy-induced wealth effects on Chinese foreign housing investments," China Economic Review, Elsevier, vol. 69(C).
    3. Boto-García, David & Baños-Pino, José Francisco, 2022. "Social influence and bandwagon effects in tourism travel," Annals of Tourism Research, Elsevier, vol. 93(C).
    4. Rui Zhou, 2022. "Sustainable Economic Development, Digital Payment, and Consumer Demand: Evidence from China," IJERPH, MDPI, vol. 19(14), pages 1-20, July.
    5. Pino, Giovanni & Amatulli, Cesare & Peluso, Alessandro M. & Nataraajan, Rajan & Guido, Gianluigi, 2019. "Brand prominence and social status in luxury consumption: A comparison of emerging and mature markets," Journal of Retailing and Consumer Services, Elsevier, vol. 46(C), pages 163-172.
    6. Alastair Langtry & Christian Ghinglino, 2023. "Status substitution and conspicuous consumption," Papers 2303.07008, arXiv.org, revised Feb 2024.
    7. Schulz, Jan & Mayerhoffer, Daniel M., 2021. "A network approach to consumption," BERG Working Paper Series 173, Bamberg University, Bamberg Economic Research Group.
    8. Wang, Junhui & Ai, Shuang & Huang, Mian, 2021. "Migration history, hukou status, and urban household consumption," Economic Modelling, Elsevier, vol. 97(C), pages 437-448.
    9. Deepika Kandpal & Dibyendu Maiti, 2022. "Social Identity, Local Neighbourhood Effect and Conspicuous Consumption: Evidence From India," Working papers 327, Centre for Development Economics, Delhi School of Economics.
    10. Ghiglino,C. & Langtry, A., 2023. "Status Substitution and Conspicuous Consumption," Cambridge Working Papers in Economics 2324, Faculty of Economics, University of Cambridge.
    11. 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.
    12. Jessica Harriger-Lin & Neha Khanna & Andreas Pape, 2020. "Conspicuous consumption and peer-group inequality: the role of preferences," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(3), pages 365-389, September.
    13. Ornella Tarola & Skerdilajda Zanaj, 2019. "Social division in the market: conspicuous consumption with nationalist feelings," DEM Discussion Paper Series 19-12, Department of Economics at the University of Luxembourg.
    14. Zhou, Xianbo & Sun, Yucheng & Tao, Ying, 2023. "Does Digital Finance Upgrade Trickle-down consumption effect in China?," Economic Modelling, Elsevier, vol. 118(C).

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    More about this item

    Keywords

    Conspicuous consumption; Demand system estimation; Tax incidence;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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