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Social and psychological determinants of consumption: Evidence for the lipstick effect during the Great Recession

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  • MacDonald, Daniel
  • Dildar, Yasemin

Abstract

Using the Great Recession as a case study, we evaluate the evidence for the “lipstick effect” by analyzing expenditures on cosmetics products using data from the Bureau of Labor Statistics’ Consumer Expenditures Survey. We find a significant increase in average cosmetics expenditures among younger women (age 18–40) during the Great Recession. The increase occurred regardless of marital or employment status, providing evidence against popular explanations for the lipstick effect in the academic literature: to wit, that women purchase more lipstick either to attract a mate during uncertain economic times, or to increase the probability of staying or becoming employed during the economic downturn. Rather, we find evidence to support the claim that the lipstick effect is caused by a substitution away from spending on women's clothes.

Suggested Citation

  • MacDonald, Daniel & Dildar, Yasemin, 2020. "Social and psychological determinants of consumption: Evidence for the lipstick effect during the Great Recession," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 86(C).
    • Handle: RePEc:eee:soceco:v:86:y:2020:i:c:s2214804319304884
    DOI: 10.1016/j.socec.2020.101527
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    References listed on IDEAS

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    1. Adam Bee & Bruce D. Meyer & James X. Sullivan, 2013. "The Validity of Consumption Data: Are the Consumer Expenditure Interview and Diary Surveys Informative?," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 204-240, National Bureau of Economic Research, Inc.
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    4. Mark Aguiar & Mark Bils, 2015. "Has Consumption Inequality Mirrored Income Inequality?," American Economic Review, American Economic Association, vol. 105(9), pages 2725-2756, September.
    5. 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.
    6. Mark Aguiar & Erik Hurst & Loukas Karabarbounis, 2013. "Time Use during the Great Recession," American Economic Review, American Economic Association, vol. 103(5), pages 1664-1696, August.
    7. Aviv Nevo & Arlene Wong, 2019. "The Elasticity Of Substitution Between Time And Market Goods: Evidence From The Great Recession," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(1), pages 25-51, February.
    8. Hyeongwoo Kim & Liping Gao, 2017. "Consumer Spending on Entertainment and the Great Recession," Auburn Economics Working Paper Series auwp2017-07, Department of Economics, Auburn University.
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    Cited by:

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