Consumption Aspirations Research Articles

The Role of the Consumption of Modern Durables in Economic Development

There has been a continuing controversy among economists about the impact consumption aspirations in developing countries have on development efforts. Although some recognition is given to the need for incentives, it is usually assumed that increases in consumption can be achieved only at the expense of saving, with a resulting decrease in resources available for investment. The desire for modern goods fostered by the demonstration effect is seen as particularly troublesome. Some economists, however, feel that not enough weight is attached to the positive effects which consumption aspirations can have on work effort. For example, Smithies states that development planners place too much stress on capital accumulation, and not enough emphasis on providing incentives which can motivate workers to exercise greater ingenuity and to put forth a greater work effort. As he says, Labor may expend more effort or exercise more ingenuity simply from a spontaneous desire to be economically effective. A more likely possibility is that a man will do more work, depending on the additional goods he can get in return for his increased effort.' This controversy has been restricted mainly to theoretical speculation, because of the lack of empirical data. Data on consumption in developing countries generally have been limited to aggregate data, which do not permit an analysis of the relationship of modern consumption to individual behavior. The present study has utilized a unique set of crosssectional data on the personal characteristics and economic behavior of modern consumer durables2 in Taiwan to explore the role of such consumption in a developing society.3