Abstract
We hypothesize that when interpersonal comparisons, often referred to as “keeping up with the Joneses”, are operational, relative deprivation (income inequality) results in increased likelihood of morbidity among lower income households. Using a simple theoretical model, we show that the larger the income disparities between “the Joneses” and “the followers”, the higher is the followers’ expenditure on conspicuous consumption and the lower is their expenditure on health. We empirically test our hypotheses using Canadian data from the Canadian Community Health Survey and the Survey of Household Spending and US data from the National Health Interview Survey. We find that, in peer groups defined by geographic proximity of residence or similar socio‐economic background, larger income disparities are associated with higher spending by the followers on conspicuous consumption, lower health expenditure, worse self‐reported health and younger age at death.
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