Discussion paper

DP11332 Consumption Network Effects

In this paper we study the relevance and mechanics of consumption network effects. We use
long panel data on the entire Danish population to construct a measure of consumption based
on administrative tax records, and define the peer groups in terms of workplace, occupation,
education, and age. We then apply an IV strategy, and fixed effect models, to recover the
effects. Our instruments arise naturally from the network structure and firms shocks. The
estimated effects are statistically significant and relevant for policies as they generate non-
negligible multiplier effect. Further, the results are consistent with a “Keeping-up”model.


De Giorgi, G and L Pistaferri (eds) (2016), “DP11332 Consumption Network Effects”, CEPR Press Discussion Paper No. 11332. https://cepr.org/publications/dp11332