IDEAS home Printed from https://ideas.repec.org/a/bla/jecrev/v59y2008i1p99-112.html
   My bibliography  Save this article

Social Status, Education And Government Spending In A Two‐Sector Model Of Endogenous Growth

Author

Listed:
  • WEN‐YA CHANG
  • YING‐AN CHEN
  • MING‐RUEY KAO

Abstract

This paper extends the relative wealth specification of status preference to the two‐sector Uzawa (1965)–Lucas (1988) model and examines the effectiveness of government spending on economic growth. It is found that the desire for relative wealth‐induced social status and/or the education component of relative wealth‐induced social status are important ingredients in determining the growth rate effects of government spending. Provided that the agent is concerned with his or her relative social position, the education‐induced social status plays a more important role than the physical‐asset‐induced social status in determining the validity of public spending on growth. If individuals do not care about their education‐driven social rewards, then an increase in government spending has no effect on the balanced growth rate regardless of the presence of the physical‐asset‐induced social status. A rise in government spending reduces the long‐run growth rate if the education‐induced social status is present.

Suggested Citation

  • Wen‐Ya Chang & Ying‐An Chen & Ming‐Ruey Kao, 2008. "Social Status, Education And Government Spending In A Two‐Sector Model Of Endogenous Growth," The Japanese Economic Review, Japanese Economic Association, vol. 59(1), pages 99-112, March.
    • Handle: RePEc:bla:jecrev:v:59:y:2008:i:1:p:99-112
    DOI: 10.1111/j.1468-5876.2007.00379.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-5876.2007.00379.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1468-5876.2007.00379.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-550, June.
    2. Turnovsky, Stephen J, 1996. "Fiscal Policy, Adjustment Costs, and Endogenous Growth," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 361-381, July.
    3. Pecorino, Paul, 1993. "Tax structure and growth in a model with human capital," Journal of Public Economics, Elsevier, vol. 52(2), pages 251-271, September.
    4. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    5. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-857, July.
    6. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    7. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    8. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
    9. Fershtman, Chaim & Weiss, Yoram, 1993. "Social Status, Culture and Economic Performance," Economic Journal, Royal Economic Society, vol. 103(419), pages 946-959, July.
    10. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
    11. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
    12. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 126-150, October.
    13. Zou, Heng-fu, 1994. "'The spirit of capitalism' and long-run growth," European Journal of Political Economy, Elsevier, vol. 10(2), pages 279-293, July.
    14. Milesi-Ferretti, Gian Maria & Roubini, Nouriel, 1998. "Growth Effects of Income and Consumption Taxes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 721-744, November.
    15. Michael B. Devereux & David R. F. Love, 1994. "The Effects of Factor Taxation in a Two-Sector Model of Endogenous Growth," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 509-536, August.
    16. Bakshi, Gurdip S & Chen, Zhiwu, 1996. "The Spirit of Capitalism and Stock-Market Prices," American Economic Review, American Economic Association, vol. 86(1), pages 133-157, March.
    17. Fershtman, Chaim & Murphy, Kevin M & Weiss, Yoram, 1996. "Social Status, Education, and Growth," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 108-132, February.
    18. Devereux, Michael B & Love, David R F, 1995. "The Dynamic Effects of Government Spending Policies in a Two-Sector Endogenous Growth Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 232-256, February.
    19. Faig, Miquel, 1995. "A simple economy with human capital: Transitional dynamics, technology shocks, and fiscal policies," Journal of Macroeconomics, Elsevier, vol. 17(3), pages 421-446.
    20. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
    21. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
    22. Buiter, Willem H, 1984. "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples," Econometrica, Econometric Society, vol. 52(3), pages 665-680, May.
    23. Burmeister, Edwin, 1980. "On Some Conceptual Issues in Rational Expectations Modeling," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 800-816, November.
    24. Mino, Kazuo, 1996. "Analysis of a Two-Sector Model of Endogenous Growth with Capital Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 227-251, February.
    25. Futagami, Koichi & Shibata, Akihisa, 1998. "Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 109-126, July.
    26. Pecorino, Paul, 1994. "The Growth Rate Effects of Tax Reform," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 492-501, July.
    27. Mino, Kazuo, 1989. "Income taxation and endogenous growth," Economics Letters, Elsevier, vol. 31(4), pages 325-329, December.
    28. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Davis, Lewis S., 2018. "Political economy of growth with a taste for status," Journal of Public Economics, Elsevier, vol. 168(C), pages 35-46.
    2. Hung-Ju Chen, 2012. "Social status, human capital formation and the long-run effects of money," Journal of Economics, Springer, vol. 105(3), pages 225-246, April.
    3. Chen, Hung- Ju, 2011. "Social status, human capital formation and super-neutrality in a two-sector monetary economy," Economic Modelling, Elsevier, vol. 28(3), pages 785-794, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chang, Wen-ya & Tsai, Hsueh-fang & Lai, Ching-chong, 2004. "Taxation, growth, and the spirit of capitalism," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1011-1025, November.
    2. Turnovsky, S., 2000. "Growth in an Open Economy: some Recent Developments," Papers 5, Warwick - Development Economics Research Centre.
    3. Milesi-Ferretti, Gian Maria & Roubini, Nouriel, 1998. "On the taxation of human and physical capital in models of endogenous growth," Journal of Public Economics, Elsevier, vol. 70(2), pages 237-254, November.
    4. Chen, Hung- Ju, 2011. "Social status, human capital formation and super-neutrality in a two-sector monetary economy," Economic Modelling, Elsevier, vol. 28(3), pages 785-794, May.
    5. Kazuo Mino, 2016. "Fiscal Policy in a Growing Economy with Financial Frictions and Firm Heterogeneity," The Japanese Economic Review, Japanese Economic Association, vol. 67(1), pages 3-30, March.
    6. Gian Maria Milesi-Ferretti & Nouriel Roubini, 1995. "Growth Effects of Income and Consumption Taxes: Positive and Normative Analysis," Working Papers 95-18, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    8. Jhy-Yuan Shieh & Wen-Ya Chang & Ching-Chong Lai, 2007. "An Endogenous Growth Model Of Capital And Arms Accumulation," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 557-575.
    9. Chang, Wen-ya & Hsieh, Yi-ni & Lai, Ching-chong, 2000. "Social status, inflation, and endogenous growth in a cash-in-advance economy," European Journal of Political Economy, Elsevier, vol. 16(3), pages 535-545, September.
    10. Zeng, Jinli, 2003. "Reexamining the interaction between innovation and capital accumulation," Journal of Macroeconomics, Elsevier, vol. 25(4), pages 541-560, December.
    11. Ben Fine, 1998. "Endogenous Growth Theory: A Critical Assessment," Working Papers 80, Department of Economics, SOAS University of London, UK.
    12. Davies, James B. & Zeng, Jinli & Zhang, Jie, 2000. "Consumption vs. income taxes when private human capital investments are imperfectly observable," Journal of Public Economics, Elsevier, vol. 77(1), pages 1-28, July.
    13. Halkos, George & Paizanos, Epameinondas, 2015. "Fiscal policy and economic performance: A review of the theoretical and empirical literature," MPRA Paper 67737, University Library of Munich, Germany.
    14. Zaifu Yang & Rong Zhang, 2021. "Generalized Cumulative Offer Processes," Discussion Papers 21/08, Department of Economics, University of York.
    15. Chen, Hung-Ju, 2011. "Social status and long-run effects of monetary policy in a two-sector monetary economy of endogenous growth," Mathematical Social Sciences, Elsevier, vol. 61(1), pages 71-79, January.
    16. Chen, Been-Lon, 2007. "Factor taxation and labor supply in a dynamic one-sector growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 31(12), pages 3941-3964, December.
    17. Yakita, Akira, 2003. "Taxation and growth with overlapping generations," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 467-487, March.
    18. Liutang Gong & Heng-fu Zou, 1998. "Fiscal Policies in a Finite Horizon Model with the Spirit of Capitalism," CEMA Working Papers 102, China Economics and Management Academy, Central University of Finance and Economics.
    19. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    20. Günther Rehme, 2011. "Endogenous Policy And Cross‐Country Growth Empirics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(2), pages 262-296, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jecrev:v:59:y:2008:i:1:p:99-112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/jeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.