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Jealousy and Wealth Inequality: The Cases of Heterogeneous Preferences and Elastic Labor Supply

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  • Sanou Issa

    (UP2 - Université Panthéon-Assas)

Abstract

This paper examines wealth and income inequalities in a simple neoclassical growth model with consumption externality. Unlike the conventional setups, we assume endogenous labor supply, heterogeneous preferences and heterogeneity of households' initial asset holdings. We highlight that in presence of heterogeneous preferences, when labor supply is elastic, wealth inequality is not deterministic and an initially wealthy and more jealous household could be caught up by an initially less wealthy and less jealous household. Our study also reveals the existence of an additional condition to the reduction of wealth inequality and shows that there is reduction in wealth inequality if wealth is highly unevenly distributed. These results are supported by our numerical simulations.

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  • Sanou Issa, 2021. "Jealousy and Wealth Inequality: The Cases of Heterogeneous Preferences and Elastic Labor Supply," Working Papers hal-03408115, HAL.
    • Handle: RePEc:hal:wpaper:hal-03408115
    Note: View the original document on HAL open archive server: https://hal.science/hal-03408115
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    More about this item

    Keywords

    Consumption externality; Income Inequality; Heterogeneous preferences; Labour supply; Status-seeking JEL classification D31; D62; D91; E13; J22; O41;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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