The Relationship between Relative Deprivation and the Behavior of Consumption and Financial Investment.

• Main Authors: Peng Chen, 陳芃
• Other Authors: 江莉莉
• Format: Others
• Language: zh-TW
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/e69mpu

碩士 === 淡江大學 === 經濟學系經濟與財務碩士班 === 106 === The income inequality in society propels people to scrutinize their own income relative to others. Such social comparison causes relative deprivation that not only influences individuals’ life satisfaction but also alters behavioral decision-making. This research aims to explore how individual relative deprivation brought about by attitudes to income inequality affects conspicuous consumption, involvement in financial investment, and life satisfaction. This paper also considers whether the conspicuous consumption that individuals undertake in social climbing causes excessive worry, consequently restraining their basic personal spending. First, this research builds a theoretical model of intertemporal consumption choice, combining an individual’s relative deprivation, choices of consumption patterns, and decision-making of financial investment. Assume that net relative deprivation which corresponds to relative deprivation minus relative satisfaction decreases the level of happiness and increases the marginal utility of conspicuous consumption, then through comparative statics of optimal choices, it is revealed that changes in the average, highest, and lowest income of the reference group do affect conspicuous consumption and financial investment decision-making through individual net relative deprivation. As a result, changes in personal income produce the income effect as well as the relative deprivation effect on conspicuous consumption, and the two effects are opposite. Without taking into account the changes in risk attitude, financial investment—crowded out by conspicuous consumption—is negatively related to net relative deprivation. Therefore, changes in personal income producing the income effect and the relative deprivation effect in the same direction cause financial investment to change in the same direction as income. Second, this research builds four empirical models of conspicuous consumption, basic personal spending, involvement in financial investment, and life satisfaction, respectively, to test four propositions. It uses data from the Taiwan Social Change Survey 2007, Round 5, Year 3: Social Stratification. In terms of the key variable net relative deprivation, this paper adopts an objective measurement introduced by Yitzhaki (1979) and estimates on the basis of micro and macro income samples. The main conclusions are as follows: Individuals compare with each other in a society with income inequality; hence, the net relative deprivation produced by such comparison increases conspicuous consumption and decreases basic personal spending, while both influences are statistically significant. The influence of net relative deprivation on individual’s involvement in financial investment is positive, yet it is not statistically significant. Lastly, individuals’ life satisfaction drops due to the influence of relative deprivation.