The quest for status and endogenous labor supply: the relative wealth framework
AbstractThis paper introduces the quest for status into the Ramsey model with endogenous labor supply. We focus our attention on relative wealth preferences. In contrast to relative consumption preferences, they allow for the possibility that agents work too little in the long run, while under both specifications the steady-state levels of consumption and the stock of physical capital exceed their socially optimal counterparts. The initial phase of transitional dynamics is unambiguously characterized by under-consumption and excessive work effort. The social optimum can be replicated by taxing capital income, where the optimal tax rate increases as physical capital accumulates.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economics.
Volume (Year): 93 (2008)
Issue (Month): 2 (March)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=108909
status; relative consumption; relative wealth; endogenous labor supply; D62; D91; E21;
Other versions of this item:
- Fisher, Walter H. & Hof, Franz X., 2005. "The Quest for Status and Endogenous Labor Supply. The Relative Wealth Framework," Economics Series 181, Institute for Advanced Studies.
- Walter H. Fisher & IHS-Vienna & Franz X. Hof, 2006. "The Quest for Status and Endogenous Labor Supply: The Relative Wealth Framework," Computing in Economics and Finance 2006 60, Society for Computational Economics.
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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