Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83986
Authors: 
Drechsel-Grau, Moritz
Schmid, Kai D.
Year of Publication: 
2013
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research 594
Abstract: 
We demonstrate that interpersonal comparisons lead to keeping up with the Joneses-behavior. Using annual household data from the German Socio-Economic Panel, we estimate the causal effect of changes in reference consumption, defined as the consumption level of all households who are perceived to be richer, on household savings and consumption. When controlling for own income, an increase in reference consumption of 100 euros leads to an increase in consumption of 10 to 25 euros. Upper middle class households are most strongly affected. Our findings provide valuable input for macroeconomic models that consider the economic consequences of interdependent preferences.
Subjects: 
Household Savings
Household Consumption
Reference Consumption
Interdependent Preferences
Relative Income Hypothesis
Income Inequality
JEL: 
D11
D12
E21
Document Type: 
Working Paper

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