Income Redistribution and Aggregate Consumption: Implications of the Relative Income Model

Do consumption expenditures depend on the household’s relative position in the income distribution?

“…Following Hirsch, 4 Frank 5 used the term ‘non‐positional good’ to refer to those consumer items whose value is not significantly affected by interpersonal comparisons. Many consumer items are identified as non‐positional items because they are not easily observed by other consumers 6 …”

Patterns of Spending Behavior and the Relative Position in the Income Distribution: Some Empirical Evidence

“…Extending Frank (1985)'s work, Kosicki (1987bKosicki ( , 1990) presented a utility maximization framework in which concern for the relative standing in the current consumption hierarchy was integrated with a permanent income framework. The results revealed that permanent income as well as income rank, are important determinants of saving rates.…”

“…Whereas the Kosicki studies (1987bKosicki studies ( , 1990 were limited to explaining saving behavior, the purpose of this paper is to further apply the Frank (1985) and Kosicki (1987bKosicki ( , 1990 model and test the importance of the integrated permanent and relative income model in explaining consumer expenditure behavior, specifically in determining major expenditure categories in the U.S. In addition, this study follows Frank (1985)'s framework and attempts to identify positional and nonpositional goods using U.S. consumer expenditure data.…”

“…If our data were consistent with Frank's model, then food at home, fuel and utilities, health insurance, gasoline and maintenance, local public transportation, and education would all be considered as positional goods or services, while household operations, apparel, vacation lodging, cash contributions, and personal insurance/pensions would all be considered as nonpositional goods. Some of these classifications seem to make sense, such as education being classified as a positional good and personal insurance/pensions as a nonpositional good, both of which are supported by Frank (1985) and Kosicki (1987bKosicki ( , 1990. However, many other classifications seem to be counterintuitive.…”

Level of Income and its Distribution as Determinants of Korean Expenditure Patterns

“…Following Hirsch (1976), Frank (1985) used the term positional good to refer to those consumer items whose value is significantly affected by interpersonal comparisons and that are easily observed by other consumers (Kosicki, 1990). Many consumer items are identified as positional items (such as food away from home and automobiles).…”