Income inequality, regional characteristics and household’s conspicuous consumption: An empirical study in developing market

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Abstract

This study aims to analyze the effect of income inequality and regional characteristics such as ethnicity and religion on conspicuous consumption for visible and invisible good types of households in the Indonesian regions by dividing regions into regions with low and high-income inequality levels based on the value median Gini index in Indonesia. The data set deployed in this study were pooled data collected from households provided by the Indonesian Central Bureau of Statistics 2017 and 2018. Employing the OLS method, we find that 1) income inequality has a negative effect on visible goods, and positive effect on invisible goods, 2) ethnicity and religion give an effect on visible and invisible goods. The government should pay attention to the phenomena of conspicuous consumption because numerous problems will likely arise if this conspicuous consumption is ignored. High conspicuous consumption would tend to lead to a materialistic lifestyle causing a higher inequality. In addition, the crime rate could equally increase given the high risk of conspicuous consumption in attracting others’ attention to individuals’ wealth.

Keywords: Conspicuous Consumption, Income Inequality, Regional Characteristics

Authors’ individual contribution: Conceptualization — Y.L. and K.K.; Methodology — Y.L. and K.K.; Software — Y.L.; Validation — Y.L. and K.K.; Formal Analysis — Y.L. and K.K.; Investigation — Y.L.; Resources — Y.L. and K.K.; Data Curation — Y.L.; Writing — Original Draft — Y.L.; Writing — Review & Editing — K.K.; Visualization — Y.L. and K.K.; Supervision — K.K.; Funding Acquisition — K.K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The Authors are thankful for the support of the PUTI Grant NKB-2509/2020 of Universitas Indonesia (University of Indonesia).

JEL Classification: D12, R20

Received: 31.07.2021
Accepted: 12.01.2022
Published online: 14.01.2022

How to cite this paper: Lastuti, Y., & Khoirunurrofik, K. (2022). Income inequality, regional characteristics and household’s conspicuous consumption: An empirical study in developing market. Journal of Governance & Regulation, 11(1), 64–72. https://doi.org/10.22495/jgrv11i1art7