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Status-Seeking Culture and Development of Capitalism

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  • Chu, Angus C.
  • Wang, Xilin

Abstract

According to Werner Sombart's classic text Luxury and Capitalism, the status-seeking behavior of individuals may facilitate the development of capitalism and give rise to an early industrialization. In this study, we develop a growth-theoretic framework to formalize this hypothesis by introducing a status-seeking preference into the Schumpeterian growth model of endogenous takeoff. Then, we use the model to explore how this cultural preference affects the transition of an economy from pre-industrial stagnation to modern economic growth. We find that a stronger preference for status seeking causes an earlier takeoff and a positive effect on economic growth in the short run but an overall ambiguous effect on growth in the long run. We also calibrate the model to data to perform a quantitative analysis and find that a stronger status-seeking preference reduces the steady-state equilibrium growth rate under reasonable parameter values. Therefore, the effects of status-seeking behaviors evolve across different stages of economic development.

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  • Chu, Angus C. & Wang, Xilin, 2020. "Status-Seeking Culture and Development of Capitalism," MPRA Paper 100023, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:100023
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    Cited by:

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    2. Chu, Angus C. & Peretto, Pietro & Xu, Rongxin, 2023. "Export-led takeoff in a Schumpeterian economy," Journal of International Economics, Elsevier, vol. 145(C).
    3. Qichun He & Yulei Luo & Jun Nie & Heng-fu Zou, 2023. "Money, Growth, and Welfare in a Schumpeterian Model with the Spirit of Capitalism," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 346-372, January.
    4. Chu, Angus & Cozzi, Guido & Fan, Haichao, 2022. "Natural Selection and Innovation-Driven Growth," MPRA Paper 113502, University Library of Munich, Germany.
    5. Qichun He & Yulei Luo & Jun Nie & Heng-fu Zou, 2023. "Money, Growth, and Welfare in a Schumpeterian Model with the Spirit of Capitalism," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 346-372, January.
    6. Vincenzo Lombardo, 2021. "Social inclusion through social status and the emergence of development traps," Metroeconomica, Wiley Blackwell, vol. 72(4), pages 798-825, November.
    7. Chu, Angus C. & Peretto, Pietro F. & Wang, Xilin, 2022. "Agricultural revolution and industrialization," Journal of Development Economics, Elsevier, vol. 158(C).
    8. Maurizio Iacopetta, 2021. "Class Di¤erences and the Commercial Revolution: An Equilibrium Selection Story," SciencePo Working papers Main halshs-03515585, HAL.
    9. Iacopetta, Maurizio, 2021. "Class differences and the Commercial Revolution: An equilibrium selection story," Economic Modelling, Elsevier, vol. 100(C).
    10. Zhou, Xianbo & Sun, Yucheng & Tao, Ying, 2023. "Does Digital Finance Upgrade Trickle-down consumption effect in China?," Economic Modelling, Elsevier, vol. 118(C).

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    More about this item

    Keywords

    status seeking; endogenous takeoff; innovation;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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