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Demonstration effects are effects on the behavior of individuals caused by observation of the actions of others and their consequences. The term is particularly used in political science and sociology to describe the fact that developments in one place will often act as a catalyst in another place.
Parents may take care of their parents to create a demonstration effect by which their children later care for them. 
Countries and local governments often adopt laws and economic policies similar to those that appear to demonstrate success elsewhere. The proven success of the policies provides a demonstration effect that impels other governments toward similar policies in order to emulate that success. It also affect on the behavior of individuals cause a low abservation of others.
In economics, demonstration effects may help explain the spread of financial or economic crises like the Asian financial crisis. Investors do not always know everything about the economic situation of countries where they invest. When investors see a country's economy collapse, however, they may question the safety of investments in countries with similar economic policies.
Some heterodox economists such as James Duesenberry and Robert H. Frank, following the original insights of Thorstein Veblen (1899), have argued that awareness of the consumption habits of others tends to inspire emulation in of these practices. Duesenberry (1949) gave the name "demonstration effect" (p. 27) to this phenomenon, arguing that it promoted unhappiness with current levels of consumption, which impacted savings rates and consequently opportunities for macroeconomic growth. Similarly, Ragnar Nurkse (1953) argued that the exposure of a society to new goods or ways of living creates unhappiness with what had previously been acceptable consumption practices; he dubbed it the "international demonstration effect." He believed that in developing nations, pressure to increase access to material goods rapidly increases primarily because people "come into contact with superior goods or superior patterns of consumption, with new articles or new ways of meeting old wants." As a result, he argued, these people are "apt to feel after a while a certain restlessness and dissatisfaction. Their knowledge is extended, their imagination stimulated; new desires are aroused" (Nurkse quoted in Kattel et al. 2009, p. 141).
In the late 18th century, the successful American Revolution might have provided a demonstration effect that sparked the subsequent French Revolution. Generally, many argue that political movements are often given a boost from the observed success of similar political movements in other countries. The domino effect thesis relates to this idea; it argued that successful communist revolutions in some countries would provide an impetus for communist revolutions in other countries.
- Duesenberry, J.S. 1949, Income, Saving and the Theory of Consumer Behavior, Harvard University Press, Cambridge.
- Kattel, R., Kregel, J.A. and Reinert, E.S. 2009, Radgnar Nurkse: Trade and Development, Anthem, London. (ISBN 1843317877) Edited Collection of Nurkse's key works.
- Nurkse, R. 1953, Problems of Capital Formation in Underdeveloped Countries, Blackwell, Oxford.
- Veblen, T. 1899  Conspicuous Consumption, Penguin Books, London.