Consumption and social identity: Evidence from India

Abstract

We examine spending on consumption items which have signaling value in social interactions across groups with distinctive social identities in India, where social identities are defined by caste and religious affiliations. The classification of such items was done by eliciting responses to a survey in India. We match the results of our survey with nationally representative micro data on household consumption expenditures. We find that disadvantaged caste groups such as Other Backward Castes spend nine percent more on visible consumption than Brahmin and High Caste groups while social groups such as Muslims spend eleven percent less, after controlling for differences in permanent income and demographic composition of households. These differences are significant and robust. Additionally, we find that these differences can be partly explained as a result of the status signaling nature of such consumption items.JEL Classification: D12, D70, O10

Conspicuous consumption and income inequality in an emerging economy: evidence from India

“…Though the conspicuous goods identified (Khamis et al 2012) in our analysis meet the technical criteria (visible and high-income elasticity) for being conspicuous, some items have raised debate on their conspicuous value in prior research. For instance, Charles et al (2009) argue that certain social groups are likely to get differential treatment in the housing market and hence do not include the housing expenses in their analysis.…”

“…Using the methodology proposed by Charles et al (2009), Khamis et al (2012) conducted a study and categorized the consumption items measured in IHDS. Of the 47 consumption items in IHDS, 12 were identified (see Appendix 1) to be the most conspicuous (more than 20 % of respondents categorized these items as Bvisible^and Bhigher income consumption^).…”

“…Fafchamps and Shilpi (2008) find that conspicuous consumption behaviors are common even among poorer and isolated households in Nepal. Similarly, Khamis et al (2012) examined the conspicuous consumption behavior of households in India and found that disadvantaged groups (such as other backward castes (OBCs)) spend significantly more on visible consumption than other high caste groups. A field experiment conducted by van Kempen (2004) among low-income households in Bolivia reveals that the poor are willing to spend higher amounts on conspicuous goods even at the expense of basic needs.…”

“…The paper follows the empirical strategy used by Charles et al (2009) and Khamis et al (2012), in modeling the relationship between income inequality and conspicuous consumption as:…”

Caste Comparisons: Evidence from India

“…A few papers show relative concerns playing an important role in India based, for instance, on wedding expenditure (Bloch et al (2004)) and more broadly conspicuous consumption (Khamis et al (2012)). Carlsson et al (2009) assess more specifically the role of castebased relative concerns in India, on the basis of a hypothetical choice experiment.…”