Robert Frank provides some interesting insights about income inequality and consumption patterns. He did so to explain why the cost of weddings in the US have risen much faster than median income. He found a similar pattern in household spending on housing. The price of a median home has increased much faster than median income. He argues that our consumption is driven by our desire to maintain our relative positional status. High income families are spending more on housing, weddings and other status symbols as their incomes have increased dramatically in recent years. The median income family has been struggling to maintain its positional status relative to high income households. High income households are not immune from the battle for positional status.
Frank proposes a progressive tax on consumption, rather than a more progressive income tax, to reduce the negative effects that derive from increasing income inequality and our efforts to maintain positional status based upon conspicuous consumption.
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