The role of social environment in household consumption decisions in Spain

Abstract

This article analyses the relationship between household consumption and that in their social environment, defined as those households that live in nearby geographical areas. The results, drawn from the Spanish Household Expenditure Survey, reveal that, on average, approximately one-third of the non-durable goods consumption of the average Spanish household is influenced to some extent by the decisions of its peer group, a magnitude that is in line with the evidence available for other countries. The influence of the social environment appears to be greater for certain specific goods, such as tobacco, clothing, leisure activities and alcohol. This analysis may help us understand how specific shocks, which initially have a direct bearing only on the expenditure of very specific population groups, ultimately affect the consumption of other, broader population groups