Relative Status and Relative Status and Interdependent Effects in Interdependent Effects in

Consumer BehaviorConsumer Behavior

Parfait GasanaParfait GasanaSociology & EconomicsSociology & Economics

University of North Carolina University of North Carolina at Chapel Hillat Chapel Hill

Preceptor: Dr. William Darity, Jr. Preceptor: Dr. William Darity, Jr.

ConsumerismConsumerism

The belief that increased material The belief that increased material goods will make everyone happier and goods will make everyone happier and better offbetter off

Consumption of goods and services Consumption of goods and services mean more than utility and enjoyment mean more than utility and enjoyment

Different Dimension: a social process Different Dimension: a social process as people interact across various as people interact across various institutions, relationships, and walks of institutions, relationships, and walks of lifelife

ImplicationsImplications Work-and-Spend Cycle; Decline in Work-and-Spend Cycle; Decline in

Leisure Leisure (Schor 1992)(Schor 1992) Declining Family Relations, Civic Declining Family Relations, Civic

Engagement, and Everyday Engagement, and Everyday Socializing Socializing (Schor 1998)(Schor 1998)

Deteriorating Family Finances Deteriorating Family Finances (Frank (Frank 1999)1999)

Threatened Natural Environment; Threatened Natural Environment; Ecological Devastation Ecological Devastation (Schor 1998(Schor 1998))

Private Affluence/Public Squalor Private Affluence/Public Squalor (Galbraith 1958)(Galbraith 1958)

ExplanationsExplanations Conspicuous Consumption Conspicuous Consumption (Veblen 1973)(Veblen 1973) Relative Income HypothesisRelative Income Hypothesis (Duesenberry (Duesenberry

1949)1949) Competitive Consumption: Reference Competitive Consumption: Reference

Groups (“keeping up with the Joneses”) Groups (“keeping up with the Joneses”) (Schor 1998)(Schor 1998)

Income Inequality → Expenditure Cascade Income Inequality → Expenditure Cascade (Frank 1999)(Frank 1999)

Want Creation Want Creation (Galbraith 1958)(Galbraith 1958)

Empirical EvidenceEmpirical Evidence Data Set: the 2005 Consumer Expenditure SurveyData Set: the 2005 Consumer Expenditure Survey Hypothesis: relative status is more important to Hypothesis: relative status is more important to

consumer behavior than absolute status; (exp. ranking consumer behavior than absolute status; (exp. ranking larger influence than total exp. amt.)larger influence than total exp. amt.)

Dependent vars. (consumer expenditure items): Dependent vars. (consumer expenditure items): - clothing (including apparel and accessories)- clothing (including apparel and accessories) - home furnishings (furniture, linens, cookware) - home furnishings (furniture, linens, cookware) - entertainment admissions (movies, plays, etc.) - entertainment admissions (movies, plays, etc.) - number of automobiles owned- number of automobiles owned Explanatory vars. (demographic characteristics): Explanatory vars. (demographic characteristics): - race - income - education level- race - income - education level - age - region - absolute exp. amt. - age - region - absolute exp. amt. - sex - family size - relative exp. ranking - sex - family size - relative exp. ranking Estimation Model: Regression analysis -2SLS, Poisson/ Estimation Model: Regression analysis -2SLS, Poisson/

Negative Binomial, & OLS regressions Negative Binomial, & OLS regressions

ConclusionConclusion Relative status is a more important Relative status is a more important

factor in consumer behavior than factor in consumer behavior than absolute status for certain items absolute status for certain items

-clothing and automobiles -clothing and automobiles People spend according to immediate People spend according to immediate

and/or media reference groups and/or media reference groups Confirms literature on relative status Confirms literature on relative status

(Deusenberry 1949, Schor 1998, & (Deusenberry 1949, Schor 1998, & Frank 1999) Frank 1999)

Cultural differences by race → Social Cultural differences by race → Social ProcessProcess

Income Earnings by Income Earnings by EducationEducation

0

10

20

30

40

50

60

70

80

90

100

Black Hisp White

H.S.

B.A.

M.A.

Prof.

Men

Source: American Council of Education (2001)

0

10

20

30

40

50

60

70

80

90

100

Black Hisp White

H.S.

B.A.

M.A.

Prof.

Women

(In thousands of dollars)

(In thousands of dollars)

Demographic InequalitiesDemographic Inequalities

0

10

20

30

40

50

60

70

80

90

100

Black Hisp White0

10

20

30

40

50

60

70

80

90

100

Black Hisp White

H.S.

B.A.

M.A.

Prof

Educational Attainment

Median Net Worth/Wealth

Source: Pew Hispanic Center (2002)

Source: U.S. Dept. of Education (2002)

(In thousands of dollars)

( In percents)

Demographic Inequalities Demographic Inequalities Cont’dCont’d

0

10

20

30

40

50

60

70

80

90

100

Black Hisp White

Unemployment Rates

Businesses Owned

Source: U.S. Dept. of Labor, BLS

Source: U.S. Census Bureau (2000)

( In percents)

(In percents)

0

2

4

6

8

10

12

14

Black Hisp White

Credit Card Debt (pct. increase from 1989-2002)

Source: Center for American Progress (2006)

0

2

4

6

8

10

12

Black Hisp White

2001

2002

2003

AfterwordAfterword Consumption as a social phenomenon –Consumption as a social phenomenon –

more than just buying and using goods and more than just buying and using goods and services, subject to price and income services, subject to price and income constraintsconstraints

--cultural, regional, gender, educational--cultural, regional, gender, educational

differencesdifferences Include relative status and interdependence Include relative status and interdependence

in economic theory → push for sustainabilityin economic theory → push for sustainability ““Maybe the Joneses and the Smiths could Maybe the Joneses and the Smiths could

even cooperate rather than compete” –even cooperate rather than compete” –Juliet SchorJuliet Schor

AcknowledgmentsAcknowledgments

Preceptor: Dr. William Darity, Jr., Econ Preceptor: Dr. William Darity, Jr., Econ Professor: Dr. Kenneth Bollen, SociologyProfessor: Dr. Kenneth Bollen, Sociology CEX experts at the Bureau of Labor CEX experts at the Bureau of Labor

Statistics (BLS) Statistics (BLS) Stats consultants at the Odom InstituteStats consultants at the Odom Institute Participants and Affiliates in the Participants and Affiliates in the

MURAP/SPGRE ProgramMURAP/SPGRE Program

Image: Barbara Smaller, cartoonist from The New

Yorker (Jan. 2004)

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