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On distributional properties of household consumption expenditures: the case of Italy

By Giorgio Fagiolo, Lucia Alessi, Matteo Barigozzi and Marco Capasso

Abstract

We present a model in which individuals' preferences are defined over their consumption, transfers to offspring, and social status associated with income. We show that a separating equilibrium exists where individuals' expenditure on conspicuous consumption is a signal for their unobserved income. In this equilibrium, poor families that climb up the social ladder by the accumulation of wealth engage in conspicuous consumption that prevents them from escaping poverty. Our model may explain why the poor make some choices that do not appear to help them escape poverty

Topics: HB Economic Theory
Publisher: SpringerLink
Year: 2010
DOI identifier: 10.1007/s00181-009-0287-5
OAI identifier: oai:eprints.lse.ac.uk:31114
Provided by: LSE Research Online
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