Black People Spend More on Shoes

Why do black people spend more on shoes?

Why do these differences exist? Aside from simple differences in preferences, signaling is one possible explanation. Suppose that high income confers status. Other people judge your income based on your conspicuous consumption and your group’s income. Under plausible conditions, the authors show that if your group’s income is already high conspicuous consumption has a low marginal product. Put differently a black man who wears a very expensive suit gets a bigger increase in status than a white man who wears the same expensive suit because the baseline income prediction is lower for the former.

The theory is plausible but I wonder if other groups haven’t converged on more efficient methods of signaling. Some groups, for example, use education as a signal. Other groups like to show how clever they are by writing pithy summaries of new economics research.

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