SFB 303 Discussion Paper No. A - 561

Author: Corneo, Giacomo, and Olivier Jeanne
Title: Status, the Distribution of Wealth, and Growth
Abstract: We analyze a simple model of endogenous growth in which individuals care about both consumption and their rank in the distribution of wealth. We show that the steady-growth rate of the economy increases with both the strength of the status-seeking motive and the initial equality of the wealth distribution. Contrary to the basic model of endogenous growth, the equilibrium growth rate is not necessarily smaller than in the social optimum, and we identify the circumstances under which the two coincide.
Keywords: endogenous growth, inequality, social status
JEL-Classification-Number: O40, O41
Creation-Date: October 1997
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