Consumption function in the context of cultural affinity zones

Abstract

Consumers' purchasing behaviour is affected at the microeconomic level by personal, psychological, situational, social and cultural factors. Beside the political and economic factors, culture with its beliefs, values, attitudes and traditions plays a substantial role also at the macroeconomic level in affecting national aggregate consumption, despite the recent phenomenon of globalisation. There is an evidence of excess sensitivity in European countries, which confirms that income change is a good predictor of consumption change. Clusters of European countries constructed according to single consumption functions correspond to some extent to the cultural affinity zones. Reactions (marginal propensity to consume) vary among formed groups of European countries and average consumption response is the highest in wealthier Western, followed by Central Europe and is the lowest in the South Europe. The results of this paper suggest that a stabilization policy may be more effective in an individualistic, hedonistic, rather a decentralised culture.