Jealous of the Joneses: conspicuous consumption, inequality, and crime

Abstract

Empirical research on the relationship between economic inequality and crime has focussed on income inequality, despite the fact that income is not easily observed by potential criminals. We extend this literature by shifting the focus from income to its visible manifestation—conspicuous consumption. Using variation within US states over time, we document a robust association between the distribution of conspicuous consumption and violent crime. Our results link violent crime to inequality in visible expenditure, but not to inequality in total expenditure, suggesting that information plays a key role in the determination of crime. Furthermore, focussing on conspicuous expenditure allows for new tests of competing theories of crime. Our findings are consistent with social theories that link crime with relative deprivation, but provide little support for traditional economic theory.