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The two sides of envy

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  • Boris Gershman

Abstract

The two sides of envy, destructive and constructive, give rise to qualitatively different equilibria, depending on the economic, institutional, and cultural environment. If investment opportunities are scarce, inequality is high, property rights are not secure, and social comparisons are strong, society is likely to be in the “fear equilibrium,” in which better endowed agents underinvest in order to avoid destructive envy of the relatively poor. Otherwise, the standard “keeping up with the Joneses” competition arises, and envy is satisfied through suboptimally high efforts. Economic growth expands the production possibilities frontier and triggers an endogenous transition from one equilibrium to the other causing a qualitative shift in the relationship between envy and economic performance: envy-avoidance behavior with its adverse effect on investment paves the way to creative emulation. From a welfare perspective, better institutions and wealth redistribution that move the society away from the low-output fear equilibrium need not be Pareto improving in the short run, as they unleash the negative consumption externality. In the long run, such policies contribute to an increase in social welfare due to enhanced productivity growth. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Boris Gershman, 2014. "The two sides of envy," Journal of Economic Growth, Springer, vol. 19(4), pages 407-438, December.
    • Handle: RePEc:kap:jecgro:v:19:y:2014:i:4:p:407-438
    DOI: 10.1007/s10887-014-9106-8
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    1. About envy
      by Economic Logician in Economic Logic on 2010-11-01 19:06:00

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    1. Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2019. "The fight-or-flight response to the Joneses and inequality," Journal of Economic Dynamics and Control, Elsevier, vol. 101(C), pages 187-210.
    2. Wei-Bin Zhang, 2018. "Envy and Inequality in Income and Wealth in a Dynamic General Equilibrium Theory," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 13(4), pages 507-523, Octubre-D.
    3. Claudius Gros, 2022. "Collective strategy condensation towards class-separated societies," Papers 2206.03421, arXiv.org.
    4. Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2018. "The Fight-or-Flight Response to the Joneses and Income Inequality," ISU General Staff Papers 201812120800001060, Iowa State University, Department of Economics.
    5. Ahamad, Mazbahul, 2016. "Envious Preferences in Two-sided Matching," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235482, Agricultural and Applied Economics Association.
    6. Koyama, Mark & Desierto, Desiree, 2020. "The Political Economy of Status Competition: Sumptuary Laws in Preindustrial Europe," CEPR Discussion Papers 14407, C.E.P.R. Discussion Papers.
    7. Maleke Fourati, 2018. "Envy and the Islamic Revival: Experimental Evidence from Tunisia," Working Papers 1235, Economic Research Forum, revised 10 Oct 2018.
    8. George Tridimas, 2020. "Modelling the Quest for Status in Ancient Greece: Paying for Liturgies," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 37(3), pages 213-236, December.
    9. Fourati, Maleke, 2018. "Envy and the Islamic revival: Experimental evidence from Tunisia," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1194-1214.
    10. Boris Gershman, 2016. "Long-Run Development and the New Cultural Economics," Working Papers 2016-06, American University, Department of Economics.
    11. Gershman, Boris, 2015. "The economic origins of the evil eye belief," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 119-144.
    12. Vincenzo Lombardo, 2021. "Social inclusion through social status and the emergence of development traps," Metroeconomica, Wiley Blackwell, vol. 72(4), pages 798-825, November.
    13. Barnett, Richard & Bhattacharya, Joydeep & Bunzel, Helle, 2016. "The Fight-or-Flight Response to the Joneses," School of Economics Working Paper Series 2016-12, LeBow College of Business, Drexel University.
    14. Zeballos, Eliana, 2015. "Getting a Leg Up or Pulling it Down? Interpersonal Comparisons and Destructive Actions: Experimental Evidence from Bolivia," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205660, Agricultural and Applied Economics Association.
    15. Yingchao Zhang & Oliver Fabel & Christian Thomann, 2015. "Pay inequity effects on back-office employees’ job performances: the case of a large insurance firm," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 421-439, June.
    16. Boris Gershman, 2021. "Witchcraft Beliefs, Social Relations, and Development," Working Papers 2021-01, American University, Department of Economics.
    17. Manvir Singh & Pascal Boyer & Leeson, Peter T & Mckay Ryan & Bentall, Richard P & Sarah Peacey & Ruth Mace & Schimmelpfennig, Robin & Muthukrishna, Michael, 2021. "Magic, explanations, and evil: the origins and design of witches and sorcerers," Post-Print hal-03256601, HAL.
    18. Claudius Gros, 2022. "Collective strategy condensation towards class-separated societies," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 95(6), pages 1-10, June.
    19. Alberto Chong & Mark Gradstein, 2019. "Institutional persistence, income inequality, and individual attitudes," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(3), pages 401-413, September.

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    More about this item

    Keywords

    Culture; Economic growth; Envy; Inequality; Institutions; Redistribution; D31; D62; D74; O15; O43; Z13;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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