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Consumption, Status and Redistribution

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Author Info
Ed Hopkins ()
Tatiana Kornienko

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Abstract

This paper considers the effect of inequality when there are concerns for status. We analyse the effects of linear redistributive taxes in an economy where agents’ utility depends both on consumption and on their rank in the distribution of consumption of a positional good. This increase in equality increases the degree of social competition. The equilibrium level of expenditure on the positional good rises for most agents with the possible exception of some with above average income. Equilibrium utility falls for those with average and above income, while the utility of the poor may (or may not) rise.

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Publisher Info
Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 127.

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Length: 16
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:edn:esedps:127

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Related research
Keywords: Status; relative standing; income inequality; consumption externalities.;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D62 - Microeconomics - - Welfare Economics - - - Externalities

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ed Hopkins & Tatiana Kornienko, 2004. "Status, Inequality and Growth," ESE Discussion Papers 123, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
  2. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    Other versions:
  3. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September. [Downloadable!]
    Other versions:
  4. Ed Hopkins & Tatiana Kornienko, 2005. "Inequality and Growth in the Presence of Competition for Status," Levine's Bibliography 122247000000000554, UCLA Department of Economics. [Downloadable!]
    Other versions:
  5. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-57, July. [Downloadable!] (restricted)
  6. Andrew Clark, 2003. "Inequality-Aversion and Income Mobility: A Direct Test," DELTA Working Papers 2003-11, DELTA (Ecole normale supérieure). [Downloadable!]
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