Epsilon Archive for Student Projects

Abstract

As climate change is emerging as one of the greatest challenges of today’s society and income inequality is rising, this raises the question of whether income inequality may have an impact on the demand for energy-intensive consumption. This thesis takes off from recent empirical evidence suggesting that the consumption of status cars is higher in areas where incomes are known to be heterogeneous – which might be driven by the desire of relatively rich households to signal status. Bricker et al. (2020) provide some empirical evidence for this hypothesis in a US county-level context in the 2000s. In this thesis, this hypothesis is tested with Swedish municipalities as the geographical unit of analysis. Using Swedish register data, a panel is constructed of all Swedish municipalities for the years 2011-2016, to estimate the impact of municipal-level-income inequality on the fraction of newly registered status cars in Swedish municipalities. To address a possible endogenous selection bias, municipalities are subsampled as urban, suburban, and rural municipalities. Status cars are defined along two different dimensions from which they may convey social status (brand and model). The results suggest that there is a positive relationship between income inequality and status cars in urban municipalities. There is no relationship found in suburban or rural municipalities.