Borrowing to keep up (with the Joneses): Inequality, debt, and conspicuous consumption

Sheheryar Banuri, Ha Nguyen

Research output: Contribution to journalArticlepeer-review

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 conspicuous consumption, access to credit, and inequality. We report four main findings: First, consumption increases when it is “conspicuous” (i.e., is both observable and signaling ability). Second, costly borrowing increases when consumption is conspicuous. Third, the increase in costly borrowing is driven by those at lower income levels. Finally, in the presence of conspicuous consumption, access to credit exacerbates inequality.
Original languageEnglish
Pages (from-to)222-242
Number of pages21
JournalJournal of Economic Behavior & Organization
Volume206
Early online date26 Dec 2022
DOIs
Publication statusE-pub ahead of print - 26 Dec 2022

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