Negative positional externality of conspicuous and positional goods on society: An empirical analysis on income and clothing consumption for 9 EU countries

Abstract

Objectives The main objectives of this study were first, through secondary sources, to analyze the way positional externality exist and its negative impact of on society, focusing on conspicuous and positional goods. Second, it tries to find the empirical evidence for the effect of positional externality in income and clothing consumption. Third, the thesis discuss various ways to reduce positional externality.

Summary The thesis first analyzes the literatures which shows the negative impact of conspicuous and positional goods on society. Then, using data from Life in Transition survey III, the thesis tests four hypotheses on the effect of positional externality on life satisfaction. Two hypotheses are related to income comparisons, while the others are related to clothing consumption. Finally, the author discusses some of the measures to reduce the effect of positional externality.

Conclusions The main findings shows controlled for income of each individual, GDP per capita and average clothing consumption has negative correlation with life satisfaction of each individual. This result shows the existence of positional externality and support the argument that positional externality has a negative impact on society.