Relative Income Hypothesis

Discipline: Economics

Proposed by JAMES STEMBLE DUESENBERRY (1918- ) but subsequently overtaken by other studies on the behavior of saving and consumption, relative income hypothesis states that an individual's attitude to consumption and saving is guided more by his income in relation to others than by an abstract standard of living.

'Keeping up with the Joneses' may be a more powerful incentive than the pursuit of wealth for its own sake.

Also see: absolute income hypothesis, life-cycle hypothesis, permanent income hypothesis

Source:
J S Duesenberry, Income, Saving and the Theory of Consumer Behavior (Cambridge, Mass., 1949)

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