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Social Capital and the Status Externality

Author

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  • Jun-ichi Itaya
  • Chris Tsoukis

Abstract

This paper investigates how the presence of social capital affects the externality arising from status-seeking preference as a parable for inefficient antagonistic behavior. It is assumed that the stock of social capital is accumulating through joint social interaction between rational individuals who are forward looking. Using a differential game, we show that although the presence of social capital mitigates the tendency of overconsumption over time, social capital ends up declining to zero. It is also shown that the benefits from social capital enhance the motivation of individuals to accumulate social capital thereby leading to deter overaccumulation and thus possibly improving social welfare.

Suggested Citation

  • Jun-ichi Itaya & Chris Tsoukis, 2017. "Social Capital and the Status Externality," CESifo Working Paper Series 6820, CESifo.
    • Handle: RePEc:ces:ceswps:_6820
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    References listed on IDEAS

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    More about this item

    Keywords

    social capital; status externality; Markov perfect; equilibrium; differential game;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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