Publication: Borrowing to Keep Up (with the Joneses): Inequality, Debt, and Conspicuous Consumption
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Date
2020-08
ISSN
Published
2020-08
Author(s)
Banuri, Sheheryar
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Abstract
The quest for status is a powerful motivator, but does it affect inequality? This paper presents a novel lab experiment that was designed and conducted to identify the relationship between inequality, status signaling, debt, and conspicuous consumption. It reports three main findings: First, consumption increases when it is "conspicuous" (i.e. is both observable, and signals ability/status). Second, borrowing increases when consumption is conspicuous. More critically, this increase in loan-taking is driven by those at the bottom of the income distribution. Third, in the presence of conspicuous consumption, access to finance exacerbates inequality. The results point to a vicious cycle of inequality and costly borrowing.
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“Banuri, Sheheryar; Nguyen, Ha. 2020. Borrowing to Keep Up (with the Joneses): Inequality, Debt, and Conspicuous Consumption. Policy Research Working Paper;No. 9354. © World Bank. http://hdl.handle.net/10986/34351 License: CC BY 3.0 IGO.”
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