Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171497
Authors: 
Valente, Simone
Year of Publication: 
2006
Series/Report no.: 
Economics Working Paper Series 06/53
Abstract: 
This paper analyzes international status seeking in a two-country model of endogenous growth: utility of agents in developing countries is a¤ected by con- sumption gaps with the average consumer in advanced economies. By distorting terms of trade, status seeking: (i) may compensate for structural gaps in physical productivity, inducing convergence; (ii) may revert the link between trade and growth; and (iii) induces divergence when interacting with technological catching- up. In particular, envy in conjunction with catching-up predicts switchovers of growth leadership: when the advanced economy is both status- and technology- leader in the short run, convergence in interest rates - e.g. due to R&D spillovers - implies that the initially lagging economy becomes growth-leader in the long run, due to permanent price distortions induced by envy.
Subjects: 
Consumption externalities
international trade
two-country models
JEL: 
D91
E21
F11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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