The impact of consumer behavior on financial security of households in Poland

Abstract

The paper applies the concept of identity to investigate whether consumer behavior matters for a household’s financial security. It is assumed that considerable part of households may express their identity through status-oriented consumption. The research is carried out in two steps. First, the index of financial security is built and used to determine the level of financial security experienced by working-age families in Poland. Second, the simulation results based on an econometric model are employed to find the answer to the question: Does financial insecurity result more from the need to manifest consumption at the higher level than average in an income-group of which people are members, or people want to be distinguishable inside of own income-group but they do not identify with a group having consumption at visibly higher level, or from the  need to improve self-image by bringing own consumption closer to the pattern of a group with higher wealth status of which they are not members?  The source of data is the 2005-2009 Households Budget Surveys in Poland. The findings offer empirical evidence for the relevance of consumer behavior for financial security of households in Poland. Considerable part of households expresses the identity through conspicuous consumption. Both groups of households, the insecurity rich and the insecurity poor,  accept the same ranking of status goods: a car on the first position, next homes (housing and equipment) and clothe on the third place. Status-oriented consumption creates life beyond means and pushes even relatively rich households towards financial insecurity.