Tournemaine, frederic and Tsoukis, Chris (2008): Status, endogenous reference standards, and the growth-inequality relation: A note.
Download (188kB) | Preview
We develop an endogenous growth model with heterogeneous agents who care about their status in society. Following the social psychology literature, we formalise the idea that the reference standard to which people compare themselves is a choice variable. In such a framework, we analyse the determinants of the choice of the reference standard and their effects on growth and distribution. We show that low skilled individuals can end up with a higher level of income than high skilled individuals if their level of ambition is high enough. This is because what matters for the choice of reference standard and inequality is the combination of skills and ambitions of individuals. Moreover, as skills and ambitions affect positively growth, we find that growth and inequalities can be either negatively or positively correlated.
|Item Type:||MPRA Paper|
|Original Title:||Status, endogenous reference standards, and the growth-inequality relation: A note|
|Subjects:||O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models|
|Depositing User:||Frederic Tournemaine|
|Date Deposited:||13. Sep 2008 00:37|
|Last Modified:||12. Feb 2013 17:00|
Barro, R. J., Sala-i-Martin, X., 2004. Economic Growth, 2nd edition, MIT press.
Bowles S., Park T. (2005) Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right? Economic Journal, 115, pp. 397-412.
Chen S., Ravallion M. (1997) What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?, The World Bank Economic Review, 11, pp. 357-382.
Clark, A.E., Oswald, A.J., 1996. Satisfaction and comparison income, Journal of Public Economics, 61, pp. 359-381.
Corneo G., Jeanne O. (1997) On relative wealth effects and the optimality of growth, Economics letters, 54, pp. 87-92.
Deninger K., L. Squire (1996) A New Data Set Measuring Income Inequality, The World Bank Economic Review, 10, pp. 565-591.
Diener E., Fujita, F. (1997), Social Comparison and Subjective Well-being, in B. P. Buunk and R. Gibbons (eds.), Health, Coping and Well-being: Perspectives from Social Comparison Theory, Lawrence Erlbaum Associates, Inc., Mahwah, NJ, 329--357.
Duesenberry J. (1949) Income, Saving, and the Theory of Consumer Behavior, Cambridge: Harvard University Press.
Falk A., M. Knell (2004) Choosing the Joneses: Endogenous Goals and Reference Standards, Scandinavian Journal of Economics, 106 (3), pp. 417-435.
Fershtman C., K.M. Murphy, Y. Weiss (1996) Social Status, Education and Growth, Journal of Political Economy, 104, pp. 108-132.
Fisher W.H., Hof F.X. (2000) Relative consumption, economic growth and taxation, Journal of Economics, 73, pp. 241-262.
Futagami K., Shibata A. (1998) Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth, Journal of Economic Behavior & Organization, 36, pp. 109-126.
Maurer J, A Meier (2008) Smooth it Like the Joneses? Estimating Peer-Group Effects in Intertemporal Consumption Choice, The Economic Journal, 118, pp. 454-476.
Partridge M. (1997) Is Inequality Harmful For Growth? Comment, American Economic Review, 87, pp. 1019-1032.
Persson T. and G. Tabellini (1994), Is inequality harmful for growth? American Economic Review, 84, pp. 600-621.
Pham T. K.C. (2005) Economic growth and Status-seeking through personal Wealth, European Journal of Political Economy, 21, pp. 404-427.
Rauscher M. (1997) Conspicuous consumption, economic growth and taxation, Journal of Economics, 66, pp. 35-42.
Romer P. (1986) Increasing Returns and Long-run Growth, Journal of Political Economy, 94, pp. 1002-1037.
Tournemaine F. (2008) Social aspirations and choice of fertility: why can status motive reduce per-capita growth?, Journal of Population Economics 21, pp. 49-66.
Tournemaine F., C. Tsoukis (2008a) Relative Consumption, Relative Wealth and Growth, Economics Letters, 100, pp. 314-316.
Tournemaine F., C. Tsoukis (2008b) Status Jobs, Human Capital and Growth: the effects of heterogeneity, Oxford Economic papers, forthcoming
Tournemaine F., C. Tsoukis (2008c) Gain versus pain from status and ambition: Effects on growth and inequality, mimeo.
Tsoukis C. (2007) Keeping up with the Joneses, Growth, and Distribution. Scottish Journal of Political Economy, 54, pp. 575-600.