Conspicuous consumption and household indebtedness

Abstract

© 2019 American Real Estate and Urban Economics Association Using a novel, large data set of consumer transactions in Singapore, we study how conspicuous consumption affects household indebtedness. The coexistence of private housing (condominiums) and subsidized public housing (Housing Development Board [HDB]) allows us to identify conspicuous consumers. Conditional on income and other socioeconomic characteristics, those who choose to reside in condominiums—considered a status good in Singapore—are likely to be more conspicuous than their counterparts living in HDB units. We find that condominium residents spend considerably more (by 25%) on conspicuous goods but not differently on inconspicuous goods. Compared with their matched HDB counterparts, these consumers with higher conspicuous motivation carry 7% more credit card debt and 108% more delinquent credit card debt. Our results suggest that status-seeking-induced conspicuous consumption is an important determinant of household indebtedness.