EMPCT Working Paper Series No. 2024-01
98 pages | PDF Download | PDF in Browser
Citation:
van Rooij, Maarten, Olivier Coibion, Dimitris Georgarakos, Bernardo Candia, and
Yuriy Gorodnichenko, “Keeping Up with the Jansens: Causal Peer Effects on Household Spending, Beliefs and Happiness” September, 2024.
Maarten van Rooij
European Central Bank and De Nederlandsche Bank
Olivier Coibion
UT Austin and NBER
Dimitris Georgarakos
European Central Bank and CEPR
Bernardo Candia
UC Berkeley
Yuriy Gorodnichenko
UC Berkeley and NBER
Abstract
How strong are peer effects on the beliefs and behavior of individuals? We use a
representative survey of households in the Netherlands to first elicit respondents’
perceptions about the income and debt of their peers. We then implement a randomized
control trial (RCT) in which treated respondents are told about either average income or
debt of individuals like them and was successful at moving respondents’ beliefs about their
relative standing. We find that individuals with exogenously higher perceived relative
income become more opposed to redistribution and increase the amount of time they spend
socializing with peers. While we find some evidence of reallocative “keeping up with the
Joneses” on spending, the quantitative magnitude is small in the months following the
information experiment. When workers learn that their peers earn more than they thought,
they become more likely to be employed in subsequent months. Finally, believing that one
earns more than peers causally leads to large positive effects on happiness, above and
beyond effects coming from spending more time with peers, changing beliefs about
redistribution, or changes in spending patterns.
