Conspicuous Consumption and Communism: Evidence from East and West Germany

33 Pages Posted: 11 Sep 2012

See all articles by Tim Friehe

Tim Friehe

University of Konstanz - Department of Economics

Mario Mechtel

Leuphana University of Lueneburg

Date Written: August 31, 2012

Abstract

This paper investigates the influence of the political regime on the relative importance of conspicuous consumption. We use the separation of Germany into the communist GDR and the democratic FRG and its reunification in 1990 as a natural experiment. Relying on household data that are representative for Germany, our empirical results strongly indicate that conspicuous consumption is relatively more important in East Germany. Importantly, a significant gap in conspicuous consumption expenditures remains even 18 years after the reunification.

Keywords: conspicuous consumption, status-seeking, relative income, political regime, behavioral economics

JEL Classification: D120, D620, P360

Suggested Citation

Friehe, Tim and Mechtel, Mario, Conspicuous Consumption and Communism: Evidence from East and West Germany (August 31, 2012). CESifo Working Paper Series No. 3922, Available at SSRN: https://ssrn.com/abstract=2144175 or http://dx.doi.org/10.2139/ssrn.2144175

Tim Friehe (Contact Author)

University of Konstanz - Department of Economics ( email )

Konstanz, D-78457
Germany

Mario Mechtel

Leuphana University of Lueneburg ( email )

Scharnhorststraße 1
Wilschenbrucher Weg 69
Lüneburg, 21335
Germany
+4941316772636 (Phone)

HOME PAGE: http://www.mario-mechtel.de

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