Status consumption and ethnicity in Bolivia: Evidence from durables ownership

Abstract

The 'compensatory consumption' hypothesis advanced by Caplovitz in 1967 predicts that households facing racial or ethnic discrimination tend to spend heavily on socially visible consumption goods to make up for their low-status position in society. This paper provides an empirical test of this prediction in Bolivia, where people of indigenous origin face social exclusion. Using recent household survey data, we examine whether low-income households of indigenous origin overspend on socially visible durable goods relative to equally poor, non-indigenous households. We find a marked difference in the propensity for compensatory consumption between the two largest indigenous groups in Bolivia.