Keeping up with the Kardashians: Evidence from a choice experiment with a nationally representative sample

Abstract

This study aims at investigating preferences regarding nominal income, standing in income distribution, and income change over time. We use a nationally representative sample and employ the Discrete Choice Experiment methodology in the random utility framework. We estimate trade-offs between the absolute income, income change over time, and relative standing in income distribution. The general finding is that the importance of relative income is greater for wealthier respondents; moreover, respondents are willing to sacrifice a large amount of their overall well-being for a constant upward trend in their earnings during their life cycle. Males are particularly sensitive to relative income: they are willing to “burn” nominal money to reach a higher status, also controlling for wealth. Our study provides evidence for the driving force behind the pursuit of wealth in more affluent countries. Despite high aggregate consumption levels, there is a concern for status as measured by relative standing in society and own income change over time.