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Moving Away from the Joneses to Move Ahead: Migration, Information Gap and Signalling

Signalling social status through the consumption of visible goods has often been perceived as a way in which individuals seek to emulate or move up compared to others within the community. Using representative migration survey data from the Indian state of Kerala, this paper assesses the impact of transnational migration on consumption of visible goods. We utilize the plausibly exogenous variation in migration networks in the neighbourhood and religious communities to account for the potential endogeneity. The findings indicate a significantly positive and robust effect of migration on conspicuous consumption, even after controlling for household income. In terms of the mechanisms, while we are unable to rule out the associated taste-based changes in preferences and the peer group effects driving up the spending on status goods, we observe only limited effects of these channels. A potential channel that we propose is information gap among permanent residents about the income levels of an out-migrant, which is leveraged by them to signal higher status in society. We explore this channel through a theoretical model where we connect migration, information gap and status good consumption. We derive a set of conditions to test whether migrants exhibit snobbish or conformist behaviour. Empirical observations indicate predominance of a snobbish behaviour.

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