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Do Status-Seeking Motives Enhance Economic Growth? A Small Open Growth Model

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  • Chang, Juin-Jen
  • Wang, Wei-Neng
  • Chen, Ying-An

Abstract

This paper explores the growth effects of both consumption- and wealth-induced social comparisons in a unified small open endogenous growth model. We analytically show that in an open economy not only do these two distinct status-seeking motives have very different growth effects, but these growth effects are also quite different from the conventional wisdom based on a closed economy. Status-seeking behavior need not favor economic growth. The asset portfolios of households and the imperfection of the international asset market both play an important role and jointly govern the growth effects of social status seeking. We also perform a quantitative experiment, showing that our analytical findings are robust and empirically plausible. Our analysis provides novel implications for social comparisons and new insights into the literature.

Suggested Citation

  • Chang, Juin-Jen & Wang, Wei-Neng & Chen, Ying-An, 2018. "Do Status-Seeking Motives Enhance Economic Growth? A Small Open Growth Model," Macroeconomic Dynamics, Cambridge University Press, vol. 22(2), pages 199-224, March.
    • Handle: RePEc:cup:macdyn:v:22:y:2018:i:02:p:199-224_00
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    Cited by:

    1. Liu, Chia-Ying & Wang, Wei-Neng, 2020. "On the optimality of social status seeking," Economic Modelling, Elsevier, vol. 93(C), pages 520-525.
    2. Juin‐Jen Chang & Hsueh‐Fang Tsai & Tsung‐Sheng Tsai, 2019. "Optimal Dynamic Taxation with Distinctive Forms of Social Status Attainment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 808-842, April.

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