Consumption peer effects and utility needs in India

• 成果类型: Article
• 署名作者: Lewbel, Arthur; Norris, Samuel; Pendakur, Krishna; Qu, Xi
• 署名单位: Boston College; University of British Columbia; Simon Fraser University; Shanghai Jiao Tong University
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE1760
• 发表日期: 2022
• 页码: 1257-1295
• 关键词: consumer demand; consumption; measurement error; welfare; peer effects; C21; C31; D12

摘要

We construct a peer effects model where mean expenditures of consumers in one's peer group affect utility through perceived consumption needs. We provide a novel method for obtaining identification in social interactions models like ours, using ordinary survey data, where very few members of each peer group are observed. We implement the model using standard household-level consumer expenditure survey microdata from India. We find that each additional rupee spent by one's peers increases perceived needs, and thereby reduces one's utility, by the equivalent of a 0.25 rupee decrease in one's own expenditures. These peer costs may be larger for richer households, meaning transfers from rich to poor could improve even inequality-neutral social welfare, by reducing peer consumption externalities. We show welfare gains of billions of dollars per year might be possible by replacing government transfers of private goods to households with providing public goods or services, to reduce peer effects.