TY - JOUR AU - Charles,Kerwin Kofi AU - Hurst,Erik AU - Roussanov,Nikolai TI - Conspicuous Consumption and Race JF - National Bureau of Economic Research Working Paper Series VL - No. 13392 PY - 2007 Y2 - September 2007 UR - http://www.nber.org/papers/w13392 L1 - http://www.nber.org/papers/w13392.pdf N1 - Author contact info: Kerwin Kofi Charles Harris School of Public Policy University of Chicago 1155 East 60th Street Chicago, IL 60637 Tel: 773.834.8922 Fax: NA E-Mail: kcharles@uchicago.edu Erik Hurst Booth School of Business University of Chicago Harper Center Chicago, IL 60637 Tel: 773/834-4073 Fax: 773/702-0458 E-Mail: erik.hurst@chicagobooth.edu Nikolai Roussanov University of Pennsylvania Wharton School, Finance Department 2400 Steinberg-Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6367 Tel: 215/746-0004 Fax: 215/898-6200 E-Mail: nroussan@wharton.upenn.edu AB - 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. ER -