SFB 303 Discussion Paper No. A - 525
Author: Corneo, Giacomo, and Olivier Jeanne
Title: Pecuniary Emulation, Inequality and Growth
Abstract: We study a model of endogenous growth in which individuals care
about both consumption and the social perception of their relative
wealth. The latter determines the social status of individuals. Social
perceptions are based upon noisy signals of an individuals's wealth,
which prevent a complete separation of types in equilibrium. We show
that the steady growth rate of the economy increases with the strength
of the status-seeking motive and, contrary to the growth model without
status, it is affected by the initial level of wealth inequality. Both
too much equality and too much inequality are found to be detrimental
to economic growth.
Keywords: endogenous growth, inequality, social status
JEL-Classification-Number: O40, O41
Creation-Date: May 1996
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