The Aspirational Income Hypothesis: On the Limits of the Relative Income Hypothesis

2020 ◽  
Author(s):  
Elias Khalil ◽  
Jason Anthony Aimone ◽  
Daniel Houser ◽  
Siyu Wang ◽  
Deborah Martinez Villarreal ◽  
...  
Keyword(s):  
Relative Income ◽  
Relative Income Hypothesis

scholarly journals The relative income hypothesis

2011 ◽  
Vol 35 (9) ◽  
pp. 1489-1501 ◽  
Author(s):  
Francisco Alvarez-Cuadrado ◽  
Ngo Van Long
Keyword(s):  
Relative Income ◽  
Relative Income Hypothesis

Keeping up with the Joneses: the Relevance of Duesenberry’s Relative Income Hypothesis in Ethiopia

2020 ◽  
Author(s):  
Tazeb Bisset ◽  
Dagmawe Tenaw
Keyword(s):  
Low Income ◽  
Aggregate Demand ◽  
Relative Income ◽  
Lower Income ◽  
Ratchet Effect ◽  
Demonstration Effect ◽  
Consumption Decisions ◽  
Distributed Lag ◽  
Relative Income Hypothesis ◽  
Ratchet Effects

Abstract Although it was mysteriously neglected and displaced by the mainstream consumption theories, the Duesenberry’s relative income hypothesis seems quite relevant to the modern societies where individuals are increasingly obsessed with their social status. Accordingly, this study aims to investigate the relevance of Duesenberry’s demonstration and ratchet effects in Ethiopia using a quarterly data from 1999/2000Q1-2018/19Q4. To this end, two specifications of relative income hypothesis are estimated using Autoregressive Distributed Lag (ARDL) regression model. The results confirm a backward-J shaped demonstration effect. This implies that an increase in relative income induces a steeper reduction in Average Propensity to consume (APC) at lower income groups (the demonstration effect is stronger for lower income households). The results also support the ratchet effect, indicating the importance of past consumption habits for current consumption decisions. In resolving the consumption puzzle, the presence of demonstration and ratchet effects reflects a stable APC in the long-run. Hence, consumption-related policies should be carefully designed as polices aimed at boosting aggregate demand can motivate low income households to gallop into wasteful competition so as to ‘keep up with the Joneses’—the relative riches.

RELATIVE INCOME VS. PERMANENT INCOME: THE CRISIS OF THE THEORY OF THE SOCIAL SIGNIFICANCE OF CONSUMPTION

2012 ◽  
Vol 34 (3) ◽  
pp. 355-377 ◽  
Author(s):  
ATTILIO TREZZINI
Keyword(s):  
Turning Point ◽  
Relative Income ◽  
Radical Change ◽  
Permanent Income ◽  
Permanent Income Hypothesis ◽  
Social Significance ◽  
Aggregate Consumption ◽  
The Social ◽  
The Usa ◽  
Relative Income Hypothesis

The investigation of aggregate consumption underwent a radical change in the USA during the 1940s and 1950s. Principles deriving from the American Institutionalist tradition attained their greatest popularity in Duesenberry’s formulation just before they were rapidly abandoned. This paper examines this turning point by comparing Duesenberry’s relative income hypothesis and Friedman’s permanent income hypothesis. This also makes it possible to identify a particular feature of Duesenberry’s analysis—its heterogeneity—which must be taken into consideration by those seeking a return to Institutionalist principles in the analysis of aggregate consumption.

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