This paper examines the structure and evolution of consumption and consumption growth inequality. Once heterogeneous agents relate their neighbors' consumption to their own, consumption volatility and inequality are affected. The relationship predicted between the group average consumption...

We demonstrate that interpersonal comparisons lead to "keeping up with the Joneses"-behavior. Using annual household data from the German Socio-Economic Panel, we estimate the causal effect of changes in reference consumption, defined as the consumption level of all households who are perceived...