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Consumption, Status and Redistribution

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  • Ed Hopkins

    ()

  • Tatiana Kornienko

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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Bibliographic 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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Keywords: Status; relative standing; income inequality; consumption externalities.;

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  1. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh.
  2. Senik, Claudia, 2004. "When information dominates comparison: Learning from Russian subjective panel data," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2099-2123, August.
  3. 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.
  4. 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.
  5. Ed Hopkins & Tatiana Kornienko, 2004. "Status, Inequality and Growth," ESE Discussion Papers 123, Edinburgh School of Economics, University of Edinburgh.
  6. Ed Hopkins & Tatiana Kornienko, 2005. "Inequality and Growth in the Presence of Competition for Status," Levine's Bibliography 122247000000000554, UCLA Department of Economics.
  7. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-16, March.
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