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A test of the conspicuous–consumption model using subjective well-being data

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  • Perez-Truglia, Ricardo

Abstract

According to the conspicuous–consumption theory, people consume highly observable goods to signal their wealth to others. A growing body of evidence favors this signaling model. However, the empirical evidence available is still far from conclusive; thus, we provide evidence from a new angle. We show that the signaling model of conspicuous consumption predicts that a consumer’s well-being should increase based on his or her household’s ranking of observable consumption within its reference group, but should not be affected by its ranking in the distribution of unobservable consumption. We test this prediction using panel data on household expenditure and subjective well-being. Our evidence is consistent with the predictions of the signaling model.

Suggested Citation

  • Perez-Truglia, Ricardo, 2013. "A test of the conspicuous–consumption model using subjective well-being data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 45(C), pages 146-154.
  • Handle: RePEc:eee:soceco:v:45:y:2013:i:c:p:146-154
    DOI: 10.1016/j.socec.2013.05.012
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    More about this item

    Keywords

    Conspicuous consumption; Signaling; Subjective well-being;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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