A Test of Conspicuous Consumption: Visibility and Income Elasticities

Ori Heffetz

doi:10.1162/rest_a_00116

A Test of Conspicuous Consumption: Visibility and Income Elasticities

¹ Hebrew University of Jerusalem · ² Cornell University · ³ National Bureau of Economic Research · ⁴ SC Johnson (United States) · ⁵ Johnson University

The Review of Economics and Statistics 2011

This paper shows that, consistent with a signaling-by-consuming model à 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.

DOI: 10.1162/rest_a_00116
Volume: 93 (4)
Pages: 1101-1117
Language: en
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