Keeping Up With The Jansens: Causal Peer Effects On Household Spending, Beliefs And Happiness

How strong are peer effects on the beliefs and behavior of individuals? We use a representative survey of households in the Netherlands to first elicit respondents’ perceptions about the income and debt of their peers. We then implement a randomized control trial (RCT) in which treated respondents are told about either average income or debt of individuals like them and was successful at moving respondents’ beliefs about their relative standing. We find that individuals with exogenously higher perceived relative income become more opposed to redistribution and increase the amount of time they spend socializing with peers. While we find some evidence of reallocative “keeping up with the Joneses†on spending, the quantitative magnitude is small in the months following the information experiment. When workers learn that their peers earn more than they thought, they become more likely to be employed in subsequent months. Finally, believing that one earns more than peers causally leads to large positive effects on happiness, above and beyond effects coming from spending more time with peers, changing beliefs about redistribution, or changes in spending patterns.