The local Joneses: Household consumption and income inequality in large metropolitan areas

Do household consumption practices depend upon local standards of decency or distinction? This article explores effects of local income structure on household consumption across 18 large U.S. metropolitan statistical areas (MSAs). Results show greater overall spending in high-inequality MSAs. But contrary to conventional depictions of “conspicuous consumption,” the additional spending goes mostly toward shelter and food, not more visible purchases of jewelry, vehicles, apparel, and entertainment. High median income, by contrast, is associated with greater spending in two visible goods categories (apparel and entertainment), but only among low-income households. Results support depictions of expenditure cascades, where spending by those better off ratchets up local standards of “normal” and socially acceptable living. Some unfortunate consequences include decreased investment in health care and heightened competition for access to quality public schooling. In this sense, growing economic inequality and positional consumption may be self-reinforcing processes.