NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Conspicuous Consumption and Race

Kerwin Kofi Charles, Erik Hurst, Nikolai Roussanov

NBER Working Paper No. 13392
Issued in September 2007
NBER Program(s):   AG   EFG   LS   PE

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.

download in pdf format
   (444 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (444 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13392

Published: Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 425-467, May.

Users who downloaded this paper also downloaded these:
Bagwell and Bernheim w4163 Conspicuous Consumption, Pure Profits, and the Luxury Tax
Charles, Hurst, and Killewald w16748 Marital Sorting and Parental Wealth
Aguiar and Hurst w10307 Consumption vs. Expenditure
Gromb and Vayanos w15821 Limits of Arbitrage: The State of the Theory
de Fontnouvelle, Jordan, and Rosengren w11103 Implications of Alternative Operational Risk Modeling Techniques
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us