IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Conspicuous Consumption, Human Capital and Poverty

  • Moav, Omer
  • Neeman, Zvika

Poor families around the world spend a large fraction of their income on consumption of goods that appear to be useless in alleviating poverty, while saving at very low rates and neglecting investment in health and education. Such consumption patterns seem to be related to the persistence of poverty. We offer an explanation for this observation, based on a trade-off between conspicuous consumption and human capital as signals for unobserved income, under the assumption that individuals care about their status. Despite homothetic preferences, this trade-off gives rise to a convex saving function, which can help explain the persistence of poverty.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6864.

in new window

Date of creation: Jun 2008
Date of revision:
Handle: RePEc:cpr:ceprdp:6864
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Bloch, Francis & Rao, Vijayendra & Desai, Sonalde, 1999. "Wedding Celebrations as Conspicuous Consumption : Signaling Social Status in Rural India," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Hopkins, Ed & Kornienko, Tatiana, 2006. "Inequality and growth in the presence of competition for status," Economics Letters, Elsevier, vol. 93(2), pages 291-296, November.
  3. Ed Hopkins & Tatiana Kornienko, 2002. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh.
  4. Banerjee, Abhijit & Duflo, Esther, 2006. "The Economic Lives of the Poor," CEPR Discussion Papers 5968, C.E.P.R. Discussion Papers.
  5. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2007. "Conspicuous Consumption and Race," NBER Working Papers 13392, National Bureau of Economic Research, Inc.
  6. Basu, Kaushik, 1989. "A Theory of Association: Social Status, Prices and Markets," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 653-71, October.
  7. Steven N. Durlauf, 1992. "A Theory of Persistent Income Inequality," NBER Working Papers 4056, National Bureau of Economic Research, Inc.
  8. Luttmer, Erzo F. P., 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," Working Paper Series rwp04-029, Harvard University, John F. Kennedy School of Government.
  9. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
  11. Mookherjee, Dilip & Ray, Debraj, 2002. "Persistent Inequality," Discussion Paper 57, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  12. Roland BĂ©nabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
  13. Moav, Omer, 2001. "Cheap Children and the Persistence of Poverty," CEPR Discussion Papers 3059, C.E.P.R. Discussion Papers.
  14. Besley, T., 1993. "Savings, Credit and Insurance," Papers 167, Princeton, Woodrow Wilson School - Development Studies.
  15. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
  16. Maoz, Yishay D & Moav, Omer, 1999. "Intergenerational Mobility and the Process of Development," Economic Journal, Royal Economic Society, vol. 109(458), pages 677-97, October.
  17. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
  18. V. Rao, 2001. "Celebrations as Social Investments: Festival Expenditures, Unit Price Variation and Social Status in Rural India," Journal of Development Studies, Taylor & Francis Journals, vol. 38(1), pages 71-97.
  19. Glazer, Amihai & Konrad, Kai A, 1996. "A Signaling Explanation for Charity," American Economic Review, American Economic Association, vol. 86(4), pages 1019-28, September.
  20. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
  21. Maristella Botticini & Aloysius Siow, 2003. "Why Dowries?," American Economic Review, American Economic Association, vol. 93(4), pages 1385-1398, September.
  22. Rao, Vijayendra, 2001. "Poverty and public celebrations in rural India," Policy Research Working Paper Series 2528, The World Bank.
  23. 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 349-73, June.
  24. Thomas Piketty, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 173-189.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6864. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.