Keeping Up with the Wangs : Relative Deprivation and Conspicuous Consumption among Chinese Consumers

The luxury goods market in China has seen a significant increase in consumer spending over the last decade. Researchers have identified economic transition and a growing middle-class to explain this evolving trend. A less discussed but important contextual determinant is growing income inequality in China, which could motivate “catch up” and “keep up” consumption patterns among the relatively deprived. In this study, we examined whether a perceived level of deprivation—a concept known as relative deprivation—is related to the consumption behavior of Chinese adults. Using the 2014 and 2016 waves of the China Family Panel Studies (CFPS), we estimated a series of regressions that link personal relative deprivation to expenditure on basic goods and conspicuous items. Our results showed that although consumer expenditure in China has increased across all categories, spending on conspicuous items has risen much faster than that on basic goods. We also found that the association between relative deprivation and the ratio of conspicuous consumption to total consumption was more pronounced among the less educated and those with enough liquidity to increase their consumption. Overall, this study highlights relative deprivation and “catch up” consumption as the likely driving force for the demand for luxury goods in emerging economies