Gilded Age, Gilded Cage: The Impact of Status-Seeking Behaviors and Luxury Shame on Recessionary Conspicuous Consumption

Abstract

This paper examines the divergent patterns of expenditures on visible goods across social class reference groups during the 2008 Great Recession. Following the status-signaling model proposed by Charles et al. (2009), I initially find that, contrary to what signaling theory may suggest, Recession-era visible expenditures decreased for unaffected households in all three reference groups. Additional analyses examining only post-Recession consumption patterns suggest that consumers’ tastes for visible goods shifted during the Great Recession, as compared to their non-recessionary preferences. Effects such as the "luxury shame" phenomenon stigmatized excessively lavish purchases during this time, and the utility derived from visible goods subsequently decreased. Ultimately, I provide empirical evidence for the detrimental impact of luxury shame on Great Recession-era conspicuous consumption. I conclude that status-signaling behavior only increases Recession-era conspicuous consumption expenditures in isolation. In interaction, however, the countervailing effects of luxury shame and other consumer preferences dominate, driving unaffected individuals to decrease their consumption of visible goods relative to pre-Recession levels. As advances in digital media make the luxury market an increasingly prominent part of the economy, researchers should continue to explore the nuances in how visible consumption patterns are influenced by macroeconomic conditions.