Status, Inequality and Growth
In this paper, we investigate whether, because of differing social organisation, the effect of greater equality may have opposing effects on economic growth in different societies. We investigate a simple endogenous growth model where agents care about their status. This is determined by their ordinal rank in the distribution of consumption. In such a situation, each individual's problem becomes strategic as her utility will depend on the consumption choices of others, so that the equilibrium consumption and investment choices depend on the distribution of income. In this model, if individuals are concerned with their status when young, greater equality leads to more intense competition for status and thus higher levels of conspicuous consumption for a large mass of individuals, with a possibility of lower investment, and thus lower growth. If individuals are concerned with their status when old, the results are reversed.
|Date of creation:||Sep 2004|
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- Cooper, Ben & Garcia-Penalosa, Cecilia & Funk, Peter, 2001.
"Status Effects and Negative Utility Growth,"
Royal Economic Society, vol. 111(473), pages 642-665, July.
- Cooper, B. & Garcia-Penalosa, C., 1998. "Status Effects and Neganive Utility Growth," Economics Papers 150, Economics Group, Nuffield College, University of Oxford.
- Banerjee, Abhijit V & Duflo, Esther, 2003. "Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-299, September.
- Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
- Aghion, Philippe & Caroli, Eve & GarcÃa-PeÃ±alosa, Cecilia, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Scholarly Articles 12502063, Harvard University Department of Economics.
- Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999. "Inequality and economic growth: the perspective of the new growth theories," CEPREMAP Working Papers (Couverture Orange) 9908, CEPREMAP.
- 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.
- Ed Hopkins & Tatiana Kornienko, 2002. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh.
- Postlewaite, Andrew, 1998. "The social basis of interdependent preferences," European Economic Review, Elsevier, vol. 42(3-5), pages 779-800, May.
- Andrew Postlewaite, "undated". ""The Social Basis of Interdependent Preferences''," CARESS Working Papres 97-14, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Andrew Postlewaite, "undated". "The Social Basis of Interdependent Preferences," Penn CARESS Working Papers 6bd000503382ae2f0b90d25e3, Penn Economics Department.
- 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.
- Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September. Full references (including those not matched with items on IDEAS)
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