Veblen was right: Why people seek unaffordable cars

Journal of Economic Issues (Taylor & Francis; print ISSN: 0021-3624; online ISSN: 1946-326X)

26 Pages Posted: 3 Jun 2021 Last revised: 14 Nov 2022

See all articles by Anna Kurysheva

Anna Kurysheva

Southern Federal University

Andrei Vernikov

Institute of Economics RAS

Date Written: June 1, 2021

Abstract

We study the connection between financialization and consumerism, and claim that greater availability of consumer loans affects consumerist culture and promotes the institution of conspicuous consumption. We extend the ideas of Thorstein Veblen who coined the term of “conspicuous consumption” to illustrate our thinking with the empirical evidence on car purchases financed through bank loans in Russia’s Rostov Region. We find that leveraged car buying has become embedded over the past 20 years. Social positioning drives people to seek more expensive cars, whereas getting a bank loan allows to buy an otherwise unaffordable car. We see a sign of conspicuousness in the fact that household income grows slower than the average price of a new car financed by a car loan, as well as the amount of loans. Our contribution is that a basic concept of institutional theory (conspicuous consumption) is combined with elements from other research approaches, namely the social significance of bank lending, functional differentiation of credit, and the effects of financialization.

Keywords: consumerist culture, institutional theory, conspicuous consumption, social positioning, household debt

JEL Classification: B52, B55, G51, R22, Z13

Suggested Citation

Kurysheva, Anna and Vernikov, Andrei V., Veblen was right: Why people seek unaffordable cars (June 1, 2021). Journal of Economic Issues (Taylor & Francis; print ISSN: 0021-3624; online ISSN: 1946-326X), Available at SSRN: https://ssrn.com/abstract=3857764 or http://dx.doi.org/10.2139/ssrn.3857764

Anna Kurysheva (Contact Author)

Southern Federal University ( email )

105 Bolshaya Sadovaya Str.
Rostov-on-Don, 344006
Russia

Andrei V. Vernikov

Institute of Economics RAS ( email )

32, Nakhimovsky Prospekt
Moscow, 117218
Russia

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