Abstract
This paper shows that, consistent with a signaling-by-consuming model à la Veblen, income elasticities can be predicted from the visibility of consumer expenditures. We outline a stylized conspicuous consumption model where income elasticity is endogenously predicted to be higher if a good is visible and lower if it is not. We then develop a survey-based measure of expenditure visibility, ranking different expenditures by how noticeable they are to others. Finally, we show that our visibility measure predicts up to one-third of the observed variation in elasticities across consumption categories in U.S. data.
Original language | American English |
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Pages (from-to) | 1101-1117 |
Number of pages | 17 |
Journal | Review of Economics and Statistics |
Volume | 93 |
Issue number | 4 |
DOIs | |
State | Published - Nov 2011 |
Externally published | Yes |