How much do we care about absolute versus relative income and consumption?

• DOI: 10.1016/j.jebo.2002.10.007
• Publication Date: 2004-08-05T03:00:10Z
• Authors: Francisco Alpizar; Fredrik Carlsson; Olof Johansson-St...
• Keywords: 8. Economic growth; 0502 economics and business; 05 social sciences; 1. No poverty

We find, using survey-experimental methods, that most individuals are concerned with both relative income and relative consumption of particular goods. The degree of concern varies in the expected direction depending on the properties of the good. However, contrary to what has been suggested in the previous literature, we find that relative consumption is also important for vacation and insurance, which are typically seen as non-positional goods. Further, absolute consumption is also found to be important for cars and housing, which are widely regarded as highly positional. © 2004 Published by Elsevier B.V.