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2001•Scandinavian Journal of EconomicsOpen access

Status, the Distribution of Wealth, and Growth

Giacomo Corneo, Olivier Jeanne

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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.

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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.

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Available 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.

Key concepts: Economics, Wealth distribution, Endogenous growth theory, Distribution (mathematics), Distribution of wealth, Consumption (sociology), Growth model, Growth rate

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