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Entrepreneurial Status, Social Norms, and Economic Growth

Listed author(s):
  • Dimitrios Varvarigos

    ()

  • Nikolaos Kontogiannis

    ()

We offer a behavioural approach on the relation between growth and volatility, based on a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods. In addition to their varying pecuniary returns, different projects also vary with respect to the status they confer to the entrepreneurs who operate them. We show that social status promotes capital accumulation. We also show that, even when the status-induced increase of marginal utility is constant over time, the interaction between status and inflation is an additional source of transitional dynamics. When a social norm links this increase of marginal utility to past outcomes, however, the dynamics can generate endogenous cycles in the transition to the balanced growth path.

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File URL: http://www.le.ac.uk/economics/research/repec/lec/leecon/dp17-05.pdf
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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 17/05.

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Date of creation: Jan 2017
Handle: RePEc:lec:leecon:17/05
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Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK

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