The Effects of Ethnic Identity on Household Budget Allocation to Status Conveying Goods

The theory of compensatory consumption suggests that a possible lack of traditional avenues for fulfilling needs for social status may lead ethnic minorities to shift measures of social status from traditional indicators such as occupational prestige to consumption indicators of status conveying goods. In this study we investigate whether a household’s ethnic identity affects its budget allocation to status conveying goods. Annual budget shares for apparel, housing, and home furnishings are used for measuring status consumption. Results show that Asian American households allocate more of their budget to housing, while African American more to apparel, compared to European households. Hispanic households allocate more of their budget to both apparel and housing than European American households, but to a lesser degree compared to Asian Americans to housing and African Americans to apparel.