Institution: Department of Economics， Boston College
Time: 10:00-11:30am, Friday, June 24th
Location: RM805, Fanhai Building
Title: Keeping up with peers in India: A nonlinear social interactions model of perceived needs
Abstract: We introduce peer effects into utility models of perceived needs. This creates obstacles to obtaining identification that differ both from standard consumer demand and from standard social interactions models. We first provide identification and an estimator for a new generic peer effects model that allows for nonlinearities, fixed effects, and the data feature that only a small number of the members of each peer group are observed. We then extend this model to our general utility framework. We obtain estimates of the dollar costs of what is spent on keeping up with others in one's peer group. These estimates have important tax policy implications, since the larger these peer effects are, the smaller are the welfare gains associated with tax cuts. We find that about two-thirds of total growth in consumption expenditures in India is devoted to keeping up with one's peers.
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