A Test of Conspicuous Consumption: Visibility and Income Elasticities
44 Pages Posted: 5 Aug 2007 Last revised: 22 Sep 2013
Date Written: April 20, 2010
This paper shows that, consistent with a signaling-by-consuming model a 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.
Keywords: cultural visibility of expenditures, conspicuous consumption, total expenditure elasticity, income elasticity, Engel curves, signaling by consuming
JEL Classification: D12, Z13
Suggested Citation: Suggested Citation