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Long Term Effects of "Prosperity in Youth" on Consumption: Evidence from China

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Abstract

We test for the long-term impact of experiencing "prosperity in youth" (PIY) on non-traditional category consumption. Using unique twenty-year panel data of individuals from nine Chinese provinces with varying levels of per-capita GDP and rates of per-capita GDP growth, we find robust evidence for the PIY effect. We find both a direct effect of one�s own prosperity and an indirect effect of the prosperity of one�s province during youth on long-term consumption. In particular, the indirect PIY effect is driven more strongly by individuals with low incomes during youth � suggesting that norms and aspirations created by the consumption of non-traditional categories by the rich during one�s youth have significant impact on long-term consumption � almost the same magnitude as the direct effect. The analysis also highlights the importance of separating cohort effects from life cycle effects for taste based products. We highlight the marketing implications for non-traditional categories in emerging markets.

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  • K. Sudhir & Ishani Tewari, 2015. "Long Term Effects of "Prosperity in Youth" on Consumption: Evidence from China," Cowles Foundation Discussion Papers 2025, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2025
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    1. Bronnenberg, Bart & Dube, Jean-Pierre & Joo, Joonhwi, 2021. "Millennials and the Take-Off of Craft Brands: Preference Formation in the U.S. Beer Industry," CEPR Discussion Papers 15706, C.E.P.R. Discussion Papers.
    2. Raphael Thomadsen & Robert P. Rooderkerk & On Amir & Neeraj Arora & Bryan Bollinger & Karsten Hansen & Leslie John & Wendy Liu & Aner Sela & Vishal Singh & K. Sudhir & Wendy Wood, 2018. "How Context Affects Choice," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 5(1), pages 3-14, March.
    3. Bart J. Bronnenberg & Jean-Pierre H. Dubé, 2016. "The Formation of Consumer Brand Preferences," NBER Working Papers 22691, National Bureau of Economic Research, Inc.
    4. Bronnenberg, Bart & Dube, Jean-Pierre, 2016. "The Formation of Consumer Brand Preferences," CEPR Discussion Papers 11648, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Cohort effects; Lifecycle effects; Emerging markets; China; Prosperity in youth; Impressionable years hypothesis; Long-term effects;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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