Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Labor and Unemployment II No. B17-V2
Based on people's ambition to be viewed as intelligent and the findings on social status and social identity we assume that higher education is associated with high social esteem. We incorporate these findings into people's educational decision and aim to explore the effects of status concerns on labor supply, wages and production. We discover that social status associated with higher education induces more workers to attend the higher educational path. In turn, labor supply of highly educated workers increases, which decreases the respective wage in equilibrium. Moreover, the wage for less educated workers increases in status concerns. There is a unique level of status concerns maximizing the product market's output. Whether production increases or decreases in status concerns depends on whether this level is exceeded or not.