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

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

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  • 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. Consumerism
    • The belief that increased material goods will make everyone happier and better off
    • Consumption of goods and services mean more than utility and enjoyment
    • Different Dimension: a social process as people interact across various institutions, relationships, and walks of life
  • 3. Implications
    • Work-and-Spend Cycle; Decline in Leisure (Schor 1992)
    • Declining Family Relations, Civic Engagement, and Everyday Socializing (Schor 1998)
    • Deteriorating Family Finances (Frank 1999)
    • Threatened Natural Environment; Ecological Devastation (Schor 1998 )
    • Private Affluence/Public Squalor (Galbraith 1958)
  • 4.  
  • 5. Explanations
    • Conspicuous Consumption (Veblen 1973)
    • Relative Income Hypothesis (Duesenberry 1949)
    • Competitive Consumption: Reference Groups (“keeping up with the Joneses”) (Schor 1998)
    • Income Inequality -> Expenditure Cascade (Frank 1999)
    • Want Creation (Galbraith 1958)
  • 6. Empirical Evidence
    • Data Set: the 2005 Consumer Expenditure Survey
    • Hypothesis: relative status is more important to consumer behavior than absolute status; (exp. ranking larger influence than total exp. amt.)
    • Dependent vars. (consumer expenditure items):
    • - clothing (including apparel and accessories)
    • - home furnishings (furniture, linens, cookware)
    • - entertainment admissions (movies, plays, etc.)
    • - number of automobiles owned
    • Explanatory vars. (demographic characteristics):
    • - race - income - education level
    • - age - region - absolute exp. amt.
    • - sex - family size - relative exp. ranking
    • Estimation Model: Regression analysis -2SLS, Poisson/ Negative Binomial, & OLS regressions
  • 7.  
  • 8.  
  • 9.  
  • 10.  
  • 11.  
  • 12. Conclusion
    • Relative status is a more important factor in consumer behavior than absolute status for certain items
    • -clothing and automobiles
    • People spend according to immediate and/or media reference groups
    • Confirms literature on relative status (Deusenberry 1949, Schor 1998, & Frank 1999)
    • Cultural differences by race -> Social Process
  • 13. Income Earnings by Education Men Source: American Council of Education (2001) Women (In thousands of dollars) (In thousands of dollars)
  • 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)
  • 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)
  • 16. Afterword
    • Consumption as a social phenomenon –more than just buying and using goods and services, subject to price and income constraints
    • --cultural, regional, gender, educational
    • differences
    • Include relative status and interdependence in economic theory -> push for sustainability
    • “ Maybe the Joneses and the Smiths could even cooperate rather than compete” –Juliet Schor
  • 17. Acknowledgments
    • Preceptor: Dr. William Darity, Jr., Econ
    • Professor: Dr. Kenneth Bollen, Sociology
    • CEX experts at the Bureau of Labor Statistics (BLS)
    • Stats consultants at the Odom Institute
    • Participants and Affiliates in the MURAP/SPGRE Program
  • 18. Image: Barbara Smaller, cartoonist from The New Yorker (Jan. 2004)
  • 19. References
    • Duesenberry, J S. (1949). Income, Saving, and the Theory of Consumer Behavior. Cambridge, Massachusetts: Harvard University Press.
    • Frank, R H. (1999). Luxury Fever: Why Money Fails to Satisfy in an Era of Excess . New York, NY : The Free Press.
    • Galbraith, J K. (1958). The Affluent Society. Cambridge, Massachusetts: The Riverside Press.
    • Kochhar, R. (2004). The Wealth of Hispanic Households: 1996 to 2002. Retrieved July 5, 2007, from Pew Hispanic Center, Washington, DC. Web site: http://pewhispanic.org/reports/report.php?ReportID=34.
    • 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: http://bush.tamu.edu/research/working_papers/mrice/social-equity.pdf.
  • 20.
    • Schor, J B. (1992). The Overworked American: The Unexpected Decline of Leisure . New York: Basic Books.
    • ------------- (1998). The Overspent American: Upscaling, Downshifting, and the New Consumer. New York, NY: Basic Books.
    • 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: http://www.hhs.gov/news/press/1999pres/19991104c.html.
    • Veblen, T. (1973). The Theory of the Leisure Class with an Introduction by John Kenneth Galbraith. Boston: Houghton Mifflin Company.
    • 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.
    • 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: http://www.americanprogress.org/issues/2006/07/b1859591.html