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Envy and Inequality

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  • Francisco Alvarez-Cuadrado
  • Ngo Van Long

Abstract

We present an overlapping generations economy populated by heterogeneous agents who care about their consumption relative to others and the bequest they leave to their offspring. In the presence of positional concerns individual saving and bequest rates vary across the income distribution. This dispersion in the rates of asset accumulation is the main channel for envy to impact the degree of intra-generational wealth inequality and its inter-generational transmission. Our results suggest that concerns for relative consumption might be an important explanatory factor for the surprisingly low levels of assets held by low-income households and the high concentration of bequests in the upper tail of the wealth distribution.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 114 (2012)
Issue (Month): 3 (09)
Pages: 949-973

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Handle: RePEc:bla:scandj:v:114:y:2012:i:3:p:949-973

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Citations

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Cited by:
  1. Paul Eckerstorfer & Ronald Wendner, 2013. "Asymmetric and Non-atmospheric Consumption Externalities, and Efficient Consumption Taxation," Economics working papers 2013-01, Department of Economics, Johannes Kepler University Linz, Austria.
  2. Casado, Jose Maria & Alvarez-Cuadrado, Francisco & Labeaga, Jose Maria & Sutthiphisal, Dhanoos, 2012. "Envy and habits: Panel data estimates of interdependent preferences," MERIT Working Papers 054, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Ngo Van Long & Stephanie F. McWhinnie, 2010. "The Tragedy of the Commons in a Fishery when Relative Performance Matters," School of Economics Working Papers 2010-07, University of Adelaide, School of Economics.
  4. Alvarez-Cuadrado, Francisco & El-Attar, Mayssun, 2012. "Income Inequality and Saving," IZA Discussion Papers 7083, Institute for the Study of Labor (IZA).
  5. Wendner, Ronald, 2011. "Ramsey, Pigou, heterogenous agents, and non-atmospheric consumption externalities," MPRA Paper 35015, University Library of Munich, Germany.

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