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How status concerns can make us rich and happy

  • Strulik, Holger

This paper considers an overlapping generations model of economic growth populated by two types of individuals. Competitive types compare future consumption (i.e. wealth) with the mean. Self-sufficient types derive utility simply from their own consumption and do not compare themselves with others. I derive a condition under which the utility (happiness) of both types increases when the economy is populated by a larger share of competitive types. In the long-run the condition is always fulfilled when the economy is capable of economic growth. The reason for this phenomenon is that competitive types generate higher savings and thus higher aggregate capital stock and income per capita, which raises utility of both types. I show that the result is robust to the consideration of endogenous work effort and that a sufficiently high share of competitive types in a society can be inevitable for long-run economic growth to exist.

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File URL: http://econstor.eu/bitstream/10419/80432/1/766254739.pdf
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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 170.

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Date of creation: 2013
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Handle: RePEc:zbw:cegedp:170
Contact details of provider: Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
Web page: http://www.cege.wiso.uni-goettingen.de/

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