Consumption, Status and Redistribution
This paper considers the effect of inequality when there are concerns for status. We analyse the effects of linear redistributive taxes in an economy where agents' utility depends both on consumption and on their rank in the distribution of consumption of a positional good. This increase in equality increases the degree of social competition. The equilibrium level of expenditure on the positional good rises for most agents with the possible exception of some with above average income. Equilibrium utility falls for those with average and above income, while the utility of the poor may (or may not) rise.
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- Bruno S. Frey & Alois Stutzer, 2002.
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- 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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- Senik, Claudia, 2004. "When information dominates comparison: Learning from Russian subjective panel data," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2099-2123, August.
- Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-57, July.
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