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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for Advanced Studies in its series Economics Series with number 181.
Length: 39 pages
Date of creation: Nov 2005
Date of revision:
Contact details of provider:
Postal: Stumpergasse 56, A-1060 Vienna, Austria
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://www.ihs.ac.at/index.php3?id=310
More information through EDIRC
Postal: Institute for Advanced Studies - Library, Stumpergasse 56, A-1060 Vienna, Austria
Other versions of this item:
- Walter Fisher & F. Hof, 2008. "The quest for status and endogenous labor supply: the relative wealth framework," Journal of Economics, Springer, vol. 93(2), pages 109-144, March.
- 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
This paper has been announced in the following NEP Reports:
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.:
- Corneo, Giacomo & Jeanne, Olivier, 2001. " Status, the Distribution of Wealth, and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(2), pages 283-93, June.
- Fisher, Walter H. & Hof, Franz X., 2000. "Relative Consumption and Endogenous Labour Supply in the Ramsey Model: Do Status-Conscious People Work Too Much?," Economics Series 85, Institute for Advanced Studies.
- Wen-Fang Liu & Stephen Turnovsky, 2003. "Consumption Externalities, Production Externalities, and the Accumulation of Capital," Working Papers UWEC-2002-13-P, University of Washington, Department of Economics, revised Nov 2003.
- Futagami, Koichi & Shibata, Akihisa, 1998. "Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 109-126, July.
- 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.
- Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
- Fisher, Walter H. & Hof, Franz X., 2001.
"Status Seeking in the Small Open Economy,"
106, Institute for Advanced Studies.
- Gali, Jordi, 1994.
"Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice, and Asset Prices,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 26(1), pages 1-8, February.
- Gali, J., 1992. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice and Asset Prices," Papers 92-22, Columbia - Graduate School of Business.
- Ngo Van Long & Koji Shimomura, 2002.
"Relative Wealth, Status Seeking, and Catching Up,"
CIRANO Working Papers
- Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
- Harbaugh, Richmond, 1996. "Falling behind the Joneses: relative consumption and the growth-savings paradox," Economics Letters, Elsevier, vol. 53(3), pages 297-304, December.
- Corneo, Giacomo & Jeanne, Olivier, 2001. "On relative-wealth effects and long-run growth," Research in Economics, Elsevier, vol. 55(4), pages 349-358, December.
- Fisher, Walter H., 2001.
"Status Preference, Wealth, and Dynamics in the Open Economy,"
99, Institute for Advanced Studies.
- Walter H. Fisher, 2004. "Status Preference, Wealth and Dynamics in the Open Economy," German Economic Review, Verein für Socialpolitik, vol. 5(3), pages 335-355, 08.
- Persson, Mats, 1995. " Why Are Taxes So High in Egalitarian Societies?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 569-80, December.
- Boskin, Michael J & Sheshinski, Eytan, 1978. "Optimal Redistributive Taxation when Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, MIT Press, vol. 92(4), pages 589-601, November.
- Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
- Walter Fisher & Franz Hof, 2000. "Relative consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 72(3), pages 241-262, October.
- Fisher, Walter H. & Heijdra, Ben J., 2009.
"Keeping up with the ageing Joneses,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 33(1), pages 53-64, January.
- Jun-ichi Itaya & Naoshige Kanamori, 2010. "Consumption taxation, social status and indeterminacy in models of endogenous growth with elastic labor supply," Journal of Economics, Springer, vol. 100(2), pages 141-163, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Szoncsitz).
If references are entirely missing, you can add them using this form.