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Why do people care about social status?

  • Rege, Mari

This paper shows that complementary interaction can induce people to care about social status because it serves as a signal of non-observable abilities. There is a unique separating equilibrium in which everyone cares about social status. In this equilibrium a person's social status perfectly reveals his abilities, and everyone matches with a person of like ability. The analysis shows that people's instrumental concern for social status has important welfare and policy implications. Indeed, peoples' efforts to "keep up with the Joneses" may be welfare enhancing.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 66 (2008)
Issue (Month): 2 (May)
Pages: 233-242

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Handle: RePEc:eee:jeborg:v:66:y:2008:i:2:p:233-242
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
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  8. 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.
  9. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
  10. Fershtman, C. & Murphy, K.M., 1993. "Social Status, Education and Growth," Papers 8-93, Tel Aviv.
  11. George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
  12. Michael Rauscher, 1997. "Conspicuous consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 66(1), pages 35-42, February.
  13. Konrad, Kai A., 1992. "Wealth seeking reconsidered," Journal of Economic Behavior & Organization, Elsevier, vol. 18(2), pages 215-227, July.
  14. Lindbeck, Assar & Snower, Dennis J, 1988. "Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach," American Economic Review, American Economic Association, vol. 78(1), pages 167-88, March.
  15. Ireland, Norman J., 1998. "Status-seeking, income taxation and efficiency," Journal of Public Economics, Elsevier, vol. 70(1), pages 99-113, October.
  16. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  17. Hanming Fang, 2001. "Social Culture and Economic Performance," American Economic Review, American Economic Association, vol. 91(4), pages 924-937, September.
  18. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
  19. Corneo, Giacomo & Jeanne, Olivier, 1999. "Social Organization in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 711-25, August.
  20. 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.
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