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.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 60.
Date of creation: 04 Jul 2006
Date of revision:
Status; Relative Consumption; Relative Wealth; Endogenous Labor Supply;
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.
- Fisher, Walter H. & Hof, Franz X., 2005. "The Quest for Status and Endogenous Labor Supply. The Relative Wealth Framework," Economics Series 181, Institute for Advanced Studies.
- 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:
- NEP-ALL-2006-07-15 (All new papers)
- NEP-LAB-2006-07-29 (Labour Economics)
- NEP-MAC-2006-07-18 (Macroeconomics)
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