When wealth or income suddenly increases (‘easy money’), this may be directed towards unproductive ‘easy spending’. This column explores the relationship between conspicuous consumption and revenue windfalls using country-specific variations in commodity export prices, and finds that the responses are bigger for luxury than for non-luxury imports. Countries that have higher inequality, weaker control of corruption, or less democracy have significantly higher luxury import responses following a commodity export windfall. These results suggest a novel (conspicuous consumption) channel of the resource curse in the context of weak mechanisms for resource allocation.
