Borrowing to keep up (with the Joneses): Inequality, debt, and conspicuous consumption

Banuri, Sheheryar and Nguyen, Ha (2023) Borrowing to keep up (with the Joneses): Inequality, debt, and conspicuous consumption. Journal of Economic Behavior & Organization, 206. pp. 222-242. ISSN 0167-2681

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The quest for status is a powerful motivator, but does it affect inequality? This paper presents a novel lab experiment that was designed and conducted to identify the relationship between conspicuous consumption, access to credit, and inequality. We report four main findings: First, consumption increases when it is “conspicuous” (i.e., is both observable and signaling ability). Second, costly borrowing increases when consumption is conspicuous. Third, the increase in costly borrowing is driven by those at lower income levels. Finally, in the presence of conspicuous consumption, access to credit exacerbates inequality.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
Depositing User: LivePure Connector
Date Deposited: 23 Jan 2023 16:31
Last Modified: 23 Jan 2023 16:31
DOI: 10.1016/j.jebo.2022.12.001

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