A test of conspicuous consumption: Visibility and income elasticities

Ori Heffetz*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

211 Scopus citations

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 languageAmerican English
Pages (from-to)1101-1117
Number of pages17
JournalReview of Economics and Statistics
Volume93
Issue number4
DOIs
StatePublished - Nov 2011
Externally publishedYes

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