Relative Status and Interdependent Effects in Consumer Behavior


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research project that focuses on the social causes in people\'s consumption patterns

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Relative Status and Interdependent Effects in Consumer Behavior

  1. 1. Relative Status and Interdependent Effects in Consumer Behavior Parfait Gasana Sociology & Economics University of North Carolina at Chapel Hill Preceptor: Dr. William Darity, Jr.
  2. 2. Consumerism <ul><li>The belief that increased material goods will make everyone happier and better off </li></ul><ul><li>Consumption of goods and services mean more than utility and enjoyment </li></ul><ul><li>Different Dimension: a social process as people interact across various institutions, relationships, and walks of life </li></ul>
  3. 3. Implications <ul><li>Work-and-Spend Cycle; Decline in Leisure (Schor 1992) </li></ul><ul><li>Declining Family Relations, Civic Engagement, and Everyday Socializing (Schor 1998) </li></ul><ul><li>Deteriorating Family Finances (Frank 1999) </li></ul><ul><li>Threatened Natural Environment; Ecological Devastation (Schor 1998 ) </li></ul><ul><li>Private Affluence/Public Squalor (Galbraith 1958) </li></ul>
  4. 5. Explanations <ul><li>Conspicuous Consumption (Veblen 1973) </li></ul><ul><li>Relative Income Hypothesis (Duesenberry 1949) </li></ul><ul><li>Competitive Consumption: Reference Groups (“keeping up with the Joneses”) (Schor 1998) </li></ul><ul><li>Income Inequality -> Expenditure Cascade (Frank 1999) </li></ul><ul><li>Want Creation (Galbraith 1958) </li></ul>
  5. 6. Empirical Evidence <ul><li>Data Set: the 2005 Consumer Expenditure Survey </li></ul><ul><li>Hypothesis: relative status is more important to consumer behavior than absolute status; (exp. ranking larger influence than total exp. amt.) </li></ul><ul><li>Dependent vars. (consumer expenditure items): </li></ul><ul><li>- clothing (including apparel and accessories) </li></ul><ul><li>- home furnishings (furniture, linens, cookware) </li></ul><ul><li>- entertainment admissions (movies, plays, etc.) </li></ul><ul><li>- number of automobiles owned </li></ul><ul><li>Explanatory vars. (demographic characteristics): </li></ul><ul><li>- race - income - education level </li></ul><ul><li>- age - region - absolute exp. amt. </li></ul><ul><li>- sex - family size - relative exp. ranking </li></ul><ul><li>Estimation Model: Regression analysis -2SLS, Poisson/ Negative Binomial, & OLS regressions </li></ul>
  6. 12. Conclusion <ul><li>Relative status is a more important factor in consumer behavior than absolute status for certain items </li></ul><ul><li>-clothing and automobiles </li></ul><ul><li>People spend according to immediate and/or media reference groups </li></ul><ul><li>Confirms literature on relative status (Deusenberry 1949, Schor 1998, & Frank 1999) </li></ul><ul><li>Cultural differences by race -> Social Process </li></ul>
  7. 13. Income Earnings by Education Men Source: American Council of Education (2001) Women (In thousands of dollars) (In thousands of dollars)
  8. 14. Demographic Inequalities Educational Attainment Median Net Worth/Wealth Source: Pew Hispanic Center (2002) Source: U.S. Dept. of Education (2002) (In thousands of dollars) ( In percents)
  9. 15. Demographic Inequalities Cont’d Unemployment Rates Businesses Owned Source: U.S. Dept. of Labor, BLS Source : U.S. Census Bureau (2000) ( In percents) (In percents) Credit Card Debt (pct. increase from 1989-2002) Source : Center for American Progress (2006)
  10. 16. Afterword <ul><li>Consumption as a social phenomenon –more than just buying and using goods and services, subject to price and income constraints </li></ul><ul><li>--cultural, regional, gender, educational </li></ul><ul><li>differences </li></ul><ul><li>Include relative status and interdependence in economic theory -> push for sustainability </li></ul><ul><li>“ Maybe the Joneses and the Smiths could even cooperate rather than compete” –Juliet Schor </li></ul>
  11. 17. Acknowledgments <ul><li>Preceptor: Dr. William Darity, Jr., Econ </li></ul><ul><li>Professor: Dr. Kenneth Bollen, Sociology </li></ul><ul><li>CEX experts at the Bureau of Labor Statistics (BLS) </li></ul><ul><li>Stats consultants at the Odom Institute </li></ul><ul><li>Participants and Affiliates in the MURAP/SPGRE Program </li></ul>
  12. 18. Image: Barbara Smaller, cartoonist from The New Yorker (Jan. 2004)
  13. 19. References <ul><li>Duesenberry, J S. (1949). Income, Saving, and the Theory of Consumer Behavior. Cambridge, Massachusetts: Harvard University Press. </li></ul><ul><li>Frank, R H. (1999). Luxury Fever: Why Money Fails to Satisfy in an Era of Excess . New York, NY : The Free Press. </li></ul><ul><li>Galbraith, J K. (1958). The Affluent Society. Cambridge, Massachusetts: The Riverside Press. </li></ul><ul><li>Kochhar, R. (2004). The Wealth of Hispanic Households: 1996 to 2002. Retrieved July 5, 2007, from Pew Hispanic Center, Washington, DC. Web site: </li></ul><ul><li>Rice, M. F. & Arekere, D. (2003). Educational Attainment and Income Earning Inequities: Differences Between African American/Hispanic Americans and Whites. Retrieved July 7, 2007, from The Bush School of Government & Public Service, Texas A & M University. Web site: </li></ul>
  14. 20. <ul><li>Schor, J B. (1992). The Overworked American: The Unexpected Decline of Leisure . New York: Basic Books. </li></ul><ul><li>------------- (1998). The Overspent American: Upscaling, Downshifting, and the New Consumer. New York, NY: Basic Books. </li></ul><ul><li>The Clinton/Gore Economic Record: Continued Strong Growth Across the Board. Retrieved July 6, 2007, from United States Department of Health and Human Services, Washington, DC. Web site: </li></ul><ul><li>Veblen, T. (1973). The Theory of the Leisure Class with an Introduction by John Kenneth Galbraith. Boston: Houghton Mifflin Company. </li></ul><ul><li>U.S. Dept. of Labor, Bureau of Labor Statistics. Consumer Expenditure Survey, 2005: Interview Survey [Computer file]. Public Use Microdata. Washington, DC: U.S. Dept. of Labor, Bureau of Labor Statistics [producer and distributor], 2007-02-17. </li></ul><ul><li>Weller, C. E. (2006). Pushing the Limit: Credit Card Debt Burdens American Families. Retrieved Oct. 6, 2007, from Center for American Progress, Washington, D.C. Web site: </li></ul>