Earlier this year, I observed that the “extravagance at the top creates “bling” expectations through society, in addition to leading to price inflation in things from property to eating out to wardrobes.” Surprisingly, there is new academic research on this point:
In particular, they focus on how changes in the behaviour of the richest 20% of households affect the spending choices of the bottom 80%. They find that a rise in the level of consumption of rich households leads to more spending by the non-rich. This “trickle-down consumption” appears to result from a desire to keep up with the Joneses. Non-rich households spend more on luxury goods and services supplied to their more affluent neighbours—domestic services, say, or health clubs.
takingpitches 