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Household Saving, Class Identitiy, and Conspicuous Consumption

Listed author(s):
  • Jon D. Wisman

The saving rate for U.S. households has long been low relative to those in other wealthy countries and in recent decades this rate has plummeted. Most studies of household saving behavior are based on the life-cycle theory of saving. However, there is doubt as to whether these studies adequately explain the low and declining rate in the U.S. This study explores two hypotheses that depart from the life-cycle explanatory framework. The first hypothesis examines the possibility that the low rate of household saving in the U.S. is related to Americans’ strong belief that vertical mobility in the U.S. is readily possible and hence their relatively weak sense of class identity. A second corollary hypothesis is that in an economy in which a high degree of vertical mobility is thought possible, a high degree of inequality in the distribution of income and wealth may reinforce the tendency to save little.

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Paper provided by American University, Department of Economics in its series Working Papers with number 2008-19.

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Length: 38 pages
Date of creation: Oct 2008
Handle: RePEc:amu:wpaper:1908
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