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Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right?

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  • Samuel Bowles

    ()
    (University of Massachusetts Amherst)

  • Yongjin Park

    ()
    (Connecticut College)

Abstract

We investigate Veblen effects on work hours, namely the way that a desire to emulate the consumption standards of the rich induces longer work hours among the rest. Consistent with our model of these asymmetric social comparisons, greater inequality predicts longer work hours in ten OECD countries over the period 1963-1998. The country fixed effects estimates of the impact of inequality on hours are large, robust, and cannot be explained by conventional incentive effects. In the presence of Veblen effects, a social welfare optimum cannot be implemented by a flat tax on consumption but may be accomplished by progressive consumption taxes.

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Bibliographic Info

Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2004-14.

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Date of creation: Nov 2004
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Handle: RePEc:ums:papers:2004-14

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Keywords: Interdependent utility; relative income; social comparisons; inequality; emulation; Veblen effects; work hours;

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  12. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
  13. Layard, Richard, 1980. "Human Satisfactions and Public Policy," Economic Journal, Royal Economic Society, vol. 90(363), pages 737-50, December.
  14. Eric Alden Smith & Samuel Bowles & Herbert Gintis, 2000. "Costly Signaling and Cooperation," Working Papers 00-12-071, Santa Fe Institute.
  15. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-73, June.
  16. Linda Bell, 1998. "Differences in Work Hours and Hours Preferences by Race in the U.S," Review of Social Economy, Taylor & Francis Journals, vol. 56(4), pages 481-500.
  17. 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.
  18. Richard B. Freeman, 2002. "The labour market in the new information economy," LSE Research Online Documents on Economics 20062, London School of Economics and Political Science, LSE Library.
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  1. Ending the arms races
    by chris dillow in Stumbling and Mumbling on 2007-12-04 11:19:57
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