Original scientific paper
https://doi.org/10.1080/1331677X.2022.2156576
Peer effects of income in consumption
Pengpeng Yue
Linlin Yu
Jun Zhou
Haigang Zhou
Abstract
This article provides a new perspective of peer effects that coexist
in different consumer activities and investigates how consumption
of a household is affected by the level of incomes of its peers.
Using unique panel data on Chinese households between 2011
and 2019, we explore the causal relationship between peers’
income and household consumption and then analyze plausible
mechanisms behind it. We find that the peer effect of income in
consumption is significantly positive. Higher level of average
income in a reference group is associated with the household’s
greater expenditure on consumption and the improvement of consumption
structure. There is also evidence that peer household
income helps to encourage the household consumption through
its impact on household income and peer household consumption.
By identifying peers’ income as the average income of other households
living in the same region, in the same age group and with
the same level of education, our research contributes to the literature
on peer effects in consumption, mapping relationships
between intragroup income and individual consumption
Keywords
Peer effect; reference group; relative income; household consumption
Hrčak ID:
310049
URI
Publication date:
1.9.2023.
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