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Social Comparisons, Inequality, and Growth

  • Markus Knell

In this paper we will study the interaction of inequality and growth when people are assumed to care about their relative standing. We show that an increase in a societies' concern for relative standing aggravates a negative impact of inequality on growth if two conditions are fulfilled: Individuals have a higher concern for their present than for their future relative standing and they have a tendency to find their reference groups among people who are wealthier than they are themselves. We present some empirical evidence that conforms to this line of explanantion.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 155 (1999)
Issue (Month): 4 (December)
Pages: 664-

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199912)155:4_664:sciag_2.0.tx_2-e
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