Status Signalling with Luxury and Cultural Goods

As the world shifts towards greater consumerism, there is an increasing tendency for individuals to distinguish themselves from the others through the goods that they purchase – which assert the society of their taste and implicit social status. While the pursuit of social status has been well-explored, most studies in this area tend to focus on luxury consumption, limited research investigated the inclusion of cultural goods (books, etiquette classes, etc.) as another signaling tool. The main objective of the paper, therefore, seeks to understand and provide a theoretical grounding for individuals’ choices between the status goods, and its implications for policy formulations and social mobility. The choice to signal status by purchasing either one of the goods is evaluated under two scenarios: when wage-enhancing benefits of cultural goods are not revealed and when they are. Individuals are found to always prefer luxury goods in the first instance, but upon satisfying certain conditions, there is possibility of those endowed with high cultural and social capital to consume cultural goods instead of luxury goods under the second scenario. Given equilibrium choices, the paper proposes policy measures for welfare-maximizing social planner to drive greater consumption of cultural goods, which also has positive impact on intergenerational mobility. While the paper attempts to illustrate the choices made under more realistic settings by relaxing a few assumptions, it mainly serves to lay the groundwork for the incorporation of cultural goods in future analysis of social status signalling.