The origins of reference groups

Abstract

Do individuals choose their reference groups, i.e. their Joneses, or are they culturally transmitted across generations and through the social environment? We provide evidence that feeds the theoretical debate about the origins of reference groups. Our findings for Uruguay suggest that reference groups are largely transmitted across generations and are also shaped by the social environment where individuals live. Our results are robust to several checks and to endogeneity issues. Our analysis of mechanisms shows that transmission is strongest when parents are homogeneous and when the gender of the parent and the offspring is the same.