Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111507
Authors: 
Gavrel, Frédéric
Rebiere, Therese
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 9056
Abstract: 
This paper provides an analysis of the social consequences of people seeking to keep up with the Joneses. All individuals attempt to reach a higher rank than the Joneses, including the Joneses themselves. This attitude gives rise to an equilibrium in which all individuals have equal utilities but unequal (gross) incomes. Due to a rat-race effect, individuals devote too much energy to climbing the social scale in this equilibrium. However, laissez-faire equilibrium is an equal-utility constrained social optimum. Unexpectedly, numerical simulations show that this theory could account for the observed distribution of intermediate wages.
Subjects: 
Keeping up with the Joneses
social interactions
well-being
inequalities
efficiency
JEL: 
D3
D6
D8
I3
Z1
Document Type: 
Working Paper

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