IDEAS home Printed from https://ideas.repec.org/a/bla/scandj/v114y2012i3p949-973.html
   My bibliography  Save this article

Envy and Inequality

Author

Listed:
  • Francisco Alvarez-Cuadrado
  • Ngo Van Long

Abstract

We present an overlapping generations economy populated by heterogeneous agents who care about their consumption relative to others and the bequest they leave to their offspring. In the presence of positional concerns individual saving and bequest rates vary across the income distribution. This dispersion in the rates of asset accumulation is the main channel for envy to impact the degree of intra-generational wealth inequality and its inter-generational transmission. Our results suggest that concerns for relative consumption might be an important explanatory factor for the surprisingly low levels of assets held by low-income households and the high concentration of bequests in the upper tail of the wealth distribution.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Francisco Alvarez-Cuadrado & Ngo Van Long, 2012. "Envy and Inequality," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 949-973, September.
    • Handle: RePEc:bla:scandj:v:114:y:2012:i:3:p:949-973
    DOI: j.1467-9442.2012.01714.x
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/j.1467-9442.2012.01714.x
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/j.1467-9442.2012.01714.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
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, vol. 70(1), pages 157-183, October.
    2. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
    3. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 425-467.
    4. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    5. Altonji Joseph G & Villanueva Ernesto, 2007. "The Marginal Propensity to Spend on Adult Children," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-52, February.
    6. Jordi Caballé & Ana I. Moro Egido, 2008. "The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth," ThE Papers 08/02, Department of Economic Theory and Economic History of the University of Granada..
    7. Kai A. Konrad, 2004. "Altruism and envy in contests: An evolutionarily stable symbiosis," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 22(3), pages 479-490, June.
    8. Andrew B. Abel, 2005. "Optimal Taxation when Consumers Have Endogenous Benchmark Levels of Consumption," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 21-42.
    9. Gali, Jordi, 1994. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice, and Asset Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 1-8, February.
    10. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-320, June.
    11. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-467, June.
    12. Arrondel, L. & Perelman, S. & Pestieau, P., 1994. "The effect of bequest motives on the composition and distribution of assests in France. In T. Tachibanski (ed.)," LIDAM Reprints CORE 1117, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
    14. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-732, August.
    15. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 151-182, July.
    16. Fisher, Walter H. & Heijdra, Ben J., 2009. "Keeping up with the ageing Joneses," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 53-64, January.
    17. Alonso-Carrera, Jaime & Caballé, Jordi & Raurich, Xavier, 2008. "Estate taxes, consumption externalities, and altruism," Journal of Public Economics, Elsevier, vol. 92(7), pages 1751-1764, July.
    18. Bossmann, Martin & Kleiber, Christian & Walde, Klaus, 2007. "Bequests, taxation and the distribution of wealth in a general equilibrium model," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1247-1271, August.
    19. repec:cor:louvrp:-1117 is not listed on IDEAS
    20. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    21. Davies, James B. & Shorrocks, Anthony F., 2000. "The distribution of wealth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 11, pages 605-675, Elsevier.
    22. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2005. "How much do we care about absolute versus relative income and consumption?," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 405-421, March.
    23. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
    24. Liu, Wen-Fang & Turnovsky, Stephen J., 2005. "Consumption externalities, production externalities, and long-run macroeconomic efficiency," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1097-1129, June.
    25. Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, vol. 75(4), pages 777-791, September.
    26. Turnovsky, Stephen J. & Monteiro, Goncalo, 2007. "Consumption externalities, production externalities, and efficient capital accumulation under time non-separable preferences," European Economic Review, Elsevier, vol. 51(2), pages 479-504, February.
    27. B. Curtis Eaton & Mukesh Eswaran, 2003. "The evolution of preferences and competition: a rationalization of Veblen's theory of invidious comparisons," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(4), pages 832-859, November.
    28. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    29. Moav, Omer & Neeman, Zvika, 2008. "Conspicuous Consumption, Human Capital and Poverty," CEPR Discussion Papers 6864, C.E.P.R. Discussion Papers.
    30. Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
    31. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
    32. J. Solnick, Sara & Hemenway, David, 1998. "Is more always better?: A survey on positional concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 373-383, November.
    33. Olof Johansson-Stenman & Fredrik Carlsson & Dinky Daruvala, 2002. "Measuring Future Grandparents" Preferences for Equality and Relative Standing," Economic Journal, Royal Economic Society, vol. 112(479), pages 362-383, April.
    Full references (including those not matched with items on IDEAS)

    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. Alvarez-Cuadrado, Francisco & Van Long, Ngo, 2011. "The relative income hypothesis," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1489-1501, September.
    2. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "A Permanent Income Version of the Relative Income Hypothesis," CESifo Working Paper Series 2361, CESifo.
    3. Francisco Alvarez‐Cuadrado & Mayssun El‐Attar Vilalta, 2018. "Income Inequality and Saving," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 80(6), pages 1029-1061, December.
    4. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "Relative Consumption and Resource Extraction," CIRANO Working Papers 2008s-27, CIRANO.
    5. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    6. Mathieu-Bolh, Nathalie & Wendner, Ronald, 2020. "We are what we eat: Obesity, income, and social comparisons," European Economic Review, Elsevier, vol. 128(C).
    7. Francisco Alvarez-Cuadrado, 2007. "Envy, leisure, and restrictions on working hours," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1286-1310, November.
    8. Thomas Aronsson & Sugata Ghosh & Ronald Wendner, 2023. "Positional preferences and efficiency in a dynamic economy," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(2), pages 311-337, August.
    9. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    10. Wendner, Ronald, 2010. "Growth And Keeping Up With The Joneses," Macroeconomic Dynamics, Cambridge University Press, vol. 14(S2), pages 176-199, November.
    11. Caballé, Jordi & Moro-Egido, Ana I., 2021. "Do aspirations reduce differences in wealth accumulation?," Economic Modelling, Elsevier, vol. 102(C).
    12. Chan, Ying Tung, 2020. "Optimal emissions tax rates under habit formation and social comparisons," Energy Policy, Elsevier, vol. 146(C).
    13. Wendner, Ronald, 2009. "Conspicuous Consumption and Overlapping Generations," MPRA Paper 15527, University Library of Munich, Germany.
    14. Wendner, Ronald, 2010. "Conspicuous consumption and generation replacement in a model of perpetual youth," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1093-1107, December.
    15. Wendner, Ronald & Goulder, Lawrence H., 2008. "Status effects, public goods provision, and excess burden," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1968-1985, October.
    16. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "Positional preferences in time and space: Optimal income taxation with dynamic social comparisons," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 1-23.
    17. Alpaslan Akay & Lisa Andersson & Peter Martinsson & Haileselassie Medhin, 2014. "Positional Concerns among the Poor: Does Reference Group Matter? Evidence from Survey Experiments," Journal of African Economies, Centre for the Study of African Economies, vol. 23(5), pages 673-699.
    18. Johansson-Stenman, Olof & Sterner, Thomas, 2015. "Discounting and relative consumption," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 19-33.
    19. Kazuo MIno & Yasuhiro Nakamoto, 2014. "Conformism and Wealth Distribution," KIER Working Papers 901, Kyoto University, Institute of Economic Research.
    20. Samano, Daniel, 2009. "Explaining Taxes at the Upper Tail of the Income Distribution: The Role of Utility Interdependence," MPRA Paper 19112, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    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:scandj:v:114:y:2012:i:3:p:949-973. 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: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442 .

    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.