Jealous of the Joneses: Conspicuous Consumption, Inequality, and Crime

Abstract

Empirical research on the relationship between economic inequality and crime has focused on income inequality, despite the fact that income is not easily observed. We extend this literature by shifting the focus from income to its visible manifestation – conspicuous consumption. Using variation within U.S. 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, the relationship between violent crime and visible expenditure inequality appears more robust than that between crime and income inequality. In addition, we show that focusing on conspicuous expenditure also allows for new tests of competing theories of crime. Our results are consistent with social theories which link crime with relative deprivation, but provide little support for traditional economic theory.

Keywords: Conspicuous Consumption, Inequality, Crime

JEL Classification: E21, E25, K42, D31, D8