IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v10y2010i1n44.html
   My bibliography  Save this article

Status, Inequality and Intertemporal Choice

Author

Listed:
  • Xia Bianjun

    () (Simon Fraser University)

Abstract

This paper develops an intertemporal model in which individuals care about consumption not only for its own sake, but also for the status it implies. By putting an additive status term into the utility function, I show that the level of inequality in the initial wealth distribution affects individuals saving and consumption behavior. The direction of the distortion in intertemporal choice relative to the standard model without a concern for status depends on the elasticity of intertemporal substitution in the utility from absolute consumption. In particular, I prove that, for conventional parameter values of the elasticity (e.g. CES parameter larger than one), people save less than what they do without the status concern but the magnitude of this decrease is reduced by the concern for future status. It is also possible that people save more than what they do without the status concern. I also analyze how changes in the initial wealth distribution affect saving. For example, when wealth is Pareto distributed, for a reasonable parameterization, the rich save more and the poor save less when society gets more unequal, which implies that inequality is self-enforcing in this economy. Finally, the resulting allocation is Pareto inefficient due to the externalities generated by the concern for status.

Suggested Citation

  • Xia Bianjun, 2010. "Status, Inequality and Intertemporal Choice," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-23, October.
  • Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:44
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/bejte.2010.10.1/bejte.2010.10.1.1606/bejte.2010.10.1.1606.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

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

    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:bpj:bejtec:v:10:y:2010:i:1:n:44. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.