Do Relative Concerns Matter? Testing Consumption Categories

Abstract

Relative concerns influence many economic choices, including household consumption decisions. In this study, we test the conspicuous consumption hypothesis. In particular, we test whether non-rich households are affected by the consumption of rich households and whether they increase their consumption of visible items to signal high status. This is one of the few studies to investigate status signaling in a developing country setting for different consumption categories. We use nationally representative data from the Turkish Household Budget Survey for the years 2003-2012. The conspicuous consumption hypothesis is validated for highly visible nondurable consumption items that possess signaling values. By contrast, we find no evidence of a similar effect on the consumption of non-visible items by the non-rich. We interpret our findings based on the economic experience of the country during the study period.