Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295792 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16769
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
How strong are peer effects on the beliefs and spending decisions of individuals? We use a randomized control study in which treated households are told about either average income or debt of individuals like them to assess how peer effects influence their beliefs and spending. The information treatments are successful at moving respondents' beliefs about peers' incomes and debt levels. We find that individuals with exogenously higher perceived relative income become more opposed to redistribution and increase the amount of time they spend socializing with peers. In addition, we find some evidence of reallocative "keeping up with the Joneses" on spending, as those who learn their peers earn more than they thought tend to reallocate their spending toward durable goods and away from non-durables. However, the quantitative magnitude of peer effects on spending is small in the months following the information experiment. Peer effects also matter for labor supply decisions and ex-post employment outcomes. Finally, believing that one earns more than peers causally leads to large positive effects on happiness, above and beyond effects coming from spending more time with peers, changing beliefs about redistribution, or changes in spending patterns.
Subjects: 
peer effects
surveys
JEL: 
D3
D6
D1
E21
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.