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Conspicuous Consumption and Peer Effects among the Poor: Evidence From a Field Experiment

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  • Christopher P Roth

Abstract

I use a randomised conditional cash transfer program from Indonesia to provide evidence on peer effects in consumption of poor households. I combine this with consumption visibility data from Indonesia to examine whether peer effects in consumption differ by a good’s visibility. In line with a model of conspicuous consumption, I find that the expenditure share of visible (nonvisible) goods rises (falls) for untreated households in treated sub-districts, whose reference group visible consumption is exogenously increased. Finally, I provide evidence on the mechanisms underlying the estimated spillovers using data on social interactions and social punishment norms. In line with Veblen’s (1899) claim that conspicuous consumption is more prevalent in societies with less social capital, I show that the peer effects in visible goods are larger in villages and for households with lower levels of social activities.

Suggested Citation

  • Christopher P Roth, 2014. "Conspicuous Consumption and Peer Effects among the Poor: Evidence From a Field Experiment," CSAE Working Paper Series 2014-29, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2014-29
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    Cited by:

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    2. Lina Martínez & John Rennie Short & Maria Isabel Zafra, 2019. "A Fragile Hold on Consumption: Consumption and the New Middle Class in Colombia," Review of European Studies, Canadian Center of Science and Education, vol. 11(3), pages 1-73, December.
    3. Leonardo Bursztyn & Bruno Ferman & Stefano Fiorin & Martin Kanz & Gautam Rao, 2018. "Status Goods: Experimental Evidence from Platinum Credit Cards," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1561-1595.
    4. Filippini, Massimo & Srinivasan, Suchita, 2019. "Impact of religious participation, social interactions and globalization on meat consumption: Evidence from India," Energy Economics, Elsevier, vol. 84(S1).
    5. König, Tobias & Lausen, Tobias, 2016. "Relative consumption preferences and public provision of private goods," Discussion Papers, Research Unit: Market Behavior SP II 2016-213, WZB Berlin Social Science Center.
    6. Antonia Grohmann & Sahra Sakha, 2015. "The Effect of Peer Observation on Consumption Choices: Experimental Evidence," Discussion Papers of DIW Berlin 1525, DIW Berlin, German Institute for Economic Research.
    7. Arthur Lewbel & Samuel Norris & Krishna Pendakur & Xi Qu, 2022. "Consumption peer effects and utility needs in India," Quantitative Economics, Econometric Society, vol. 13(3), pages 1257-1295, July.
    8. Montano-Campos, Felipe & Perez-Truglia, Ricardo, 2019. "Giving to charity to signal smarts: evidence from a lab experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 193-199.

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    More about this item

    Keywords

    Conspicuous Consumption; Peer Effects; Relative Concerns; Spillovers; Social Interactions; Social Norms;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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