Borrowing to Keep Up (with the Joneses) : Inequality, Debt, and Conspicuous Consumption
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 consump...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/742421597065801715/Borrowing-to-Keep-Up-with-the-Joneses-Inequality-Debt-and-Conspicuous-Consumption http://hdl.handle.net/10986/34351 |
| 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. |
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