Consumption, Status and Redistribution
AbstractThis 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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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 127.
Date of creation: Oct 2004
Date of revision:
Status; relative standing; income inequality; consumption externalities.;
Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
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.:
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