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Migration Information Gap and Visible Consumption Evidence from India

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Document pages: 29 pages

Abstract: Using representative migration survey data from the Indian state of Kerala,this paper assesses the impact of transnational migration on social signalingthrough the consumption of visible goods. Using the plausibly exogenousvariation in migration networks in the neighborhood and religious communitiesto account for the potential endogeneity, we find significant and positiveeffects on conspicuous consumption. In terms of the mechanisms, we put forwardthree possible channels. While we are unable to rule out the associated changesin preferences driving up the spending on status goods, we observe only modesteffects of peer group spending due to higher status competition. A key channelthat we propose through a theoretical framework is a potential information gapamong permanent residents about the income levels of a migrant. This we arguecan be leveraged by migrants to increase the visible consumption to gain higherstatus in the society.

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