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Conspicuous consumption and household indebtedness

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  • Kwan Ok Lee
  • Masaki Mori

Abstract

Using a novel, large data set of consumer transactions in Singapore, we study how conspicuous consumption affects household indebtedness. The coexistence of private housing (condominiums) and subsidized public housing (Housing Development Board [HDB]) allows us to identify conspicuous consumers. Conditional on income and other socioeconomic characteristics, those who choose to reside in condominiums—considered a status good in Singapore—are likely to be more conspicuous than their counterparts living in HDB units. We find that condominium residents spend considerably more (by 25%) on conspicuous goods but not differently on inconspicuous goods. Compared with their matched HDB counterparts, these consumers with higher conspicuous motivation carry 7% more credit card debt and 108% more delinquent credit card debt. Our results suggest that status‐seeking‐induced conspicuous consumption is an important determinant of household indebtedness.

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  • Kwan Ok Lee & Masaki Mori, 2021. "Conspicuous consumption and household indebtedness," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S2), pages 557-586, September.
    • Handle: RePEc:bla:reesec:v:49:y:2021:i:s2:p:557-586
    DOI: 10.1111/1540-6229.12305
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    2. J. M. C. Santos Silva & Silvana Tenreyro, 2022. "The Log of Gravity at 15," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 423-437, September.
    3. Jing Li & Kelin Chen & Chao Yan & Zhong Tang, 2024. "The Impact of Income Disparity on Food Consumption—Microdata from Rural China," Agriculture, MDPI, vol. 14(5), pages 1-23, April.
    4. Sarah Mansour & Nagwa Samak & Nesma Gad, 2024. "Credit Choices in Rural Egypt: A Comparative Study of Formal and Informal Borrowing," JRFM, MDPI, vol. 17(11), pages 1-36, October.

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