Consumption Network Effects / Giacomo De Giorgi, Anders Frederiksen, Luigi Pistaferri.

Format:

Book

Author/Creator:

De Giorgi, Giacomo.

Contributor:

National Bureau of Economic Research.

Frederiksen, Anders.

Pistaferri, Luigi.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22357.

NBER working paper series no. w22357

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

In this paper we study consumption network effects. Does the consumption of our peers affect our own consumption? How large is such effect? What are the economic mechanisms behind it? We use long panel data on the entire Danish population to construct a measure of consumption based on administrative tax records on income and assets. We combine tax record data with matched employer-employee data so that we can construct peer groups based on workplace, which gives us a much tighter, precise, and credible definition of networks than used in previous literature. We use the available data to construct peer groups that do not perfectly overlap, and as such provide valid instruments derived from the network structure of one's peers group. The longitudinal nature of our data also allow us to estimate fixed effects models, which help us tackle reflection, self-selection, and common-shocks issues all at once. We estimate non-negligible and statistically significant endogenous and exogenous peer effects. Estimated effects are quite relevant for policies as they generate non-negligible multiplier effect. We also investigate what mechanisms generate such effects, distinguishing between "keeping up with the Joneses", a status model, and a more traditional risk sharing view.

Notes:

Print version record

June 2016.