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Occupational choice and the spirit of capitalism

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Author Info
Matthias Doepke
Fabrizio Zilibotti

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Abstract

The British Industrial Revolution triggered a reversal in the social order of society whereby the landed elite was replaced by industrial capitalists rising from the middle classes as the economically dominant group. Many observers have linked this transformation to the contrast in values between a hard-working and frugal middle class and an upper class imbued with disdain for work. We propose an economic theory of preference formation where both the divergence of attitudes across social classes and the ensuing reversal of economic fortunes are equilibrium outcomes. In our theory, parents shape their children's preferences in response to economic incentives. If financial markets are imperfect, this results in the stratification of society along occupational lines. Middle-class families in occupations that require effort, skill, and experience develop patience and work ethic, whereas upper-class families relying on rental income cultivate a refined taste for leisure. These class-specific attitudes, which are rooted in the nature of pre-industrial professions, become key determinants of success once industrialization transforms the economic landscape.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp326.

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Date of creation: Jun 2007
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Handle: RePEc:zur:iewwpx:326

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Related research
Keywords: Aristocracy; endogenous preferences; entrepreneurship; finance; growth and income distribution; financial development; financial market imperfections; industrial revolution; middle class; patience; portfolio choice; savings; spirit of capitalism; work ethic;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
G00 - Financial Economics - - General - - - General
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913

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