Abstract

This Independent Study is motivated by the silent and age-old pressure on women to conform to beauty standards set out by society, the power it yields on tangible outcomes in their lives, and the monetary and opportunity costs this comes with. I seek to ask how income shocks affect consumption of beauty products, and whether the size of that response varies based on the rigidity of social norms such as beauty standards. In doing so, I develop a theoretical framework that operates in two parts: a consumer-choice model that models the ‘lipstick effect’, an anomaly in economic theory which emerges when beauty product expenditure increases during economic shocks, when the relative fall in the price of beauty products as compared to other comparable products produces a substitution effect which is larger than the income effect of the economic shock; and a labor market signalling model in which beauty expenditure functions as an equilibrium cost of separating workers into two distinct groups based on the size of social norms such as the beauty premium which operates in the labor market as the beauty premium (Mobius and Rosenblat, 2006). Together, these models predict that beauty product demand should have low income elasticity, especially in countries where beauty norms are more rigid since the rewards to appearance are higher. Thus, to put these predictions to test, I use an unbalanced panel of 411 country-year observations across 14 OECD countries from 1994-2024, estimating the income elasticity of household expenditure on personal-care products (OECD COICOP catergory CP121) in first differences, both pooled and country-by-country.

As it turned out, the central prediction is not supported: personal-care consumption is approximately unit-elastic with respect to income (0.92-1.00) rather than income-inelastic, the cross-country ordering of estimated elasticities does not track conventional characterizations of beauty-norm rigidity. The 2020 income contraction, too, produced no detectable decoupling of beauty spending from income. The consistent insignificance of the unemployment rate also weighs against employment-based accounts of the lipstick effect (MacDonald and Dildar, 2020). While these results reject my hypothesis, I believe that there is a likelihood that they could be considered inconclusive rather than incorrect, with a robust method of measuring cross-country beauty-norm rigidity and the use of categorized consumption data rather than that which does not separate beauty related goods and services or those which are more overt rather than covert.

Advisor

Moledina, Amyaz

Department

Economics

Keywords

Women, Gender Economics, Beauty, Lipstick Index, Economics

Publication Date

2026

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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