Do Relative Concerns Matter? Testing Consumption Categories

It is well-known that relative concerns influence many economic choices, including consumption decisions of households. In this paper, we test the conspicuous consumption hypothesis. In particular, we test whether non-rich households are affected by the consumption of the rich and increase their consumption of visible items to signal high status. This is one of the few studies that investigates status signaling in a developing country setting. We use nationally representative data from the Turkish Household Budget Survey that covers the years 2003-2012, a period of high economic growth. The conspicuous consumption hypothesis is validated for highly visible nondurable consumption items that possess signaling value. In contrast, we find no evidence for a similar effect on the consumption of non-visible items by the non-rich. We interpret our findings in light of the economic experience of the country within the last decade.