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The two sides of envy

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  • Gershman, Boris

Abstract

The two sides of envy, destructive and competitive, give rise to qualitatively different equilibria, depending on economic, institutional, and cultural environment. If inequality is high, property rights are poorly protected, and social comparisons are strong, the society is likely to settle in the "fear equilibrium," in which better endowed agents restrain their efforts to prevent destructive envy of the relatively poor. In the opposite case, the standard "keeping up with the Joneses" competition arises, and individuals satisfy their relative standing concerns through suboptimally high efforts. The different nature of these equilibria leads to starkingly contrasting effects of envy on economic performance. From welfare perspective, adoption of better institutions may not be Pareto improving, since positional externality is curbed in the low-output fear equilibrium. The theory is consistent with broad empirical facts from social sciences and bridges the gap between separate lines of research on envy.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25422.

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Date of creation: 23 Sep 2010
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Handle: RePEc:pra:mprapa:25422

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Keywords: Envy; Inequality; Positional Externalities; Property Rights;

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  1. About envy
    by Economic Logician in Economic Logic on 2010-11-01 14:06:00
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Cited by:
  1. Boris Gershman, 2013. "The Economic Origins of the Evil Eye Belief," Working Papers, American University, Department of Economics 2013-14, American University, Department of Economics.

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