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The Impact of Income Inequality on the Visible Expenditure of Chinas Households

【Authors】
ZHOU Guangsu, FAN Gang & MA Guangrong


【WorkUnit】
ZHOU Guangsu (Renmin University of China, 100872)

FAN Gang (NERI and Peking University, 100038)

MA Guangrong (Renmin University of China, 100872)

【Abstract】

Income inequality could enhance individuals motivation for seeking high social status; as a result, the way of consumption would be changed. We use China Family Panel Studies (CFPS) representative data in 2010 to verify that the widening income gap increases households visible expenditure. The results show that income disparity pushes households to build larger houses or buying more expensive houses, and spend much more on gifts. By studying the channels, we find that income inequality could decrease individuals self-reported social status. Furthermore, income inequality's impact on low-income households' visible expenditure is bigger than that on high-income households.

 

JEL:D12, D91, E21

【KeyWords】
Income Inequality, Status Seeking, Visible Expenditure, Gift Expenditure, Housing Expenditure