Conspicuous Consumption, Human Capital and Poverty
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.
|Date of creation:||Jun 2008|
|Date of revision:|
|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: |
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.:
- Oded Galor & Joseph Zeira, 1993.
"Income Distribution and Macroeconomics,"
Review of Economic Studies,
Oxford University Press, vol. 60(1), pages 35-52.
- Moav, Omer, 2001.
"Cheap Children and the Persistence of Poverty,"
CEPR Discussion Papers
3059, C.E.P.R. Discussion Papers.
- Durlauf, Steven N, 1996.
"A Theory of Persistent Income Inequality,"
Journal of Economic Growth,
Springer, vol. 1(1), pages 75-93, March.
- Abhijit V. Banerjee & Esther Duflo, 2007.
"The Economic Lives of the Poor,"
Journal of Economic Perspectives,
American Economic Association, vol. 21(1), pages 141-168, Winter.
- 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).
- Francis Bloch & Vijayendra Rao & Sonalde Desai, 2004. "Wedding Celebrations as Conspicuous Consumption: Signaling Social Status in Rural India," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
- Ed Hopkins & Tatiana Kornienko, 2004.
"Running to Keep in the Same Place: Consumer Choice as a Game of Status,"
American Economic Review,
American Economic Association, vol. 94(4), pages 1085-1107, September.
- 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.
- Banerjee, Abhijit V & Newman, Andrew F, 1993.
"Occupational Choice and the Process of Development,"
Journal of Political Economy,
University of Chicago Press, vol. 101(2), pages 274-98, April.
- 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.
- 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.
- Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
- Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc.
- 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.
- Glazer, Amihai & Konrad, Kai A, 1996. "A Signaling Explanation for Charity," American Economic Review, American Economic Association, vol. 86(4), pages 1019-28, September.
- Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
- 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.
- 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.
- Clark, Andrew E. & Oswald, Andrew J., 1994.
"Satisfaction and comparison income,"
CEPREMAP Working Papers (Couverture Orange)
- 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.
- 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.
- Dilip Mookherjee & Debraj Ray, 2000.
Boston University - Department of Economics - The Institute for Economic Development Working Papers Series
dp-108, Boston University - Department of Economics, revised Oct 2002.
- Rao, Vijayendra, 2001. "Poverty and public celebrations in rural India," Policy Research Working Paper Series 2528, The World Bank.
- Maristella Botticini & Aloysius Siow, 1999.
Boston University - Institute for Economic Development
95, Boston University, Institute for Economic Development.
- Maristella Botticini & Aloysius Siow, 2000. "Why Dowries?," Econometric Society World Congress 2000 Contributed Papers 0200, Econometric Society.
- Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2007. "Conspicuous Consumption and Race," NBER Working Papers 13392, National Bureau of Economic Research, Inc.
- Besley, Timothy, 1995.
"Savings, credit and insurance,"
Handbook of Development Economics,
in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 36, pages 2123-2207
- Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
- 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.
- Hopkins, Ed & Kornienko, Tatiana, 2006.
"Inequality and growth in the presence of competition for status,"
Elsevier, vol. 93(2), pages 291-296, November.
- Ed Hopkins & Tatiana Kornienko, 2005. "Inequality and Growth in the Presence of Competition for Status," Levine's Bibliography 122247000000000554, UCLA Department of Economics.
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 references are entirely missing, you can add them using this form.