Borrowing to Keep Up (with the Joneses)
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 inequality, status signaling, debt, and conspicuous consumption. It reports three main findings: First, consumption increases when it is "conspicuous" (i.e. is both observable, and signals ability/status). Second, borrowing increases when consumption is conspicuous. More critically, this increase in loan-taking is driven by those at the bottom of the income distribution. Third, in the presence of conspicuous consumption, access to finance exacerbates inequality. The results point to a vicious cycle of inequality and costly borrowing.
| Main Authors: | , |
|---|---|
| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020-08
|
| Subjects: | INEQUALITY, SOCIOECONOMIC STATUS, CONSPICUOUS CONSUMPTION, VEBLEN GOODS, ACCESS TO FINANCE, HOUSEHOLD DEBT, |
| Online Access: | http://documents.worldbank.org/curated/en/742421597065801715/Borrowing-to-Keep-Up-with-the-Joneses-Inequality-Debt-and-Conspicuous-Consumption https://hdl.handle.net/10986/34351 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | 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 inequality,
status signaling, debt, and conspicuous consumption. It
reports three main findings: First, consumption increases
when it is "conspicuous" (i.e. is both observable,
and signals ability/status). Second, borrowing increases
when consumption is conspicuous. More critically, this
increase in loan-taking is driven by those at the bottom of
the income distribution. Third, in the presence of
conspicuous consumption, access to finance exacerbates
inequality. The results point to a vicious cycle of
inequality and costly borrowing. |
|---|