Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192223 
Year of Publication: 
1998
Series/Report no.: 
Discussion Papers No. 240
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
This paper examines the implications of status-seeking behavior for long-term growth in a competitive economy. We explore the intuitive hypothesis that the quest for enhanced economic status leads to excessive levels of production and consumption. In a Ramsey growth model in which preferences are altered to include a concern for relative consumption, status seeking has no impacts on the economys long-run equilibrium in the absence of a labor-leisure tradeoff. Relative consumption effects do, however, induce short-term departures from efficient resource allocation, either augmenting or depressing consumption growth rates in accordance with the elasticity of substitution between consumption and status. In the case where social status is defined in terms of the relative accumulation of manufactured capital, status seeking leads to excessive rates of short-run growth and inefficiently high levels of capital and consumption in the long-run equilibrium. Similar results hold when preferences embody a concern for career status as captured by the relative accumulation of human capital, and when relative consumption effects are accompanied by a labor-leisure tradeoff.
Subjects: 
Growth
Status preferences
relative consumption
relative capital
JEL: 
O40
Document Type: 
Working Paper

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