Abstract

http://ssrn.com/abstract=1014340
 
 

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Conspicuous Consumption and Race


Kerwin Kofi Charles


University of Michigan - Department of Economics & Ford School; National Bureau of Economic Research (NBER)

Erik Hurst


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Nikolai L. Roussanov


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

September 2007

NBER Working Paper No. w13392

Abstract:     
Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. We demonstrate that these differences exist among virtually all sub-populations, that they are relatively constant over time, and that they are economically large. While racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used to reflect a household's economic position relative to a reference group. Using merged data on race and state level income, we demonstrate that a key prediction of our model -- that visible consumption should be declining in mean reference group income -- is strongly borne out in the data separately for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption. We conclude with an assessment of the role of conspicuous consumption in explaining lower spending by racial minorities on items likes health and education, as well as their lower rates of wealth accumulation.

Number of Pages in PDF File: 65

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Date posted: September 14, 2007  

Suggested Citation

Charles, Kerwin Kofi and Hurst, Erik and Roussanov, Nikolai L., Conspicuous Consumption and Race (September 2007). NBER Working Paper No. w13392. Available at SSRN: http://ssrn.com/abstract=1014340

Contact Information

Kerwin K. Charles (Contact Author)
University of Michigan - Department of Economics & Ford School ( email )
611 Tappan Street
Ann Arbor, MI 48109-1220
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Erik Hurst
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Nikolai L. Roussanov
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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