Entrepreneurial Status, Social Norms, and Economic Growth

Dimitrios Varvarigos () and Nikolaos Kontogiannis ()

No 17/05, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: We offer a behavioural approach on the relation between growth and volatility, based on a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods. In addition to their varying pecuniary returns, different projects also vary with respect to the status they confer to the entrepreneurs who operate them. We show that social status promotes capital accumulation. We also show that, even when the status-induced increase of marginal utility is constant over time, the interaction between status and inflation is an additional source of transitional dynamics. When a social norm links this increase of marginal utility to past outcomes, however, the dynamics can generate endogenous cycles in the transition to the balanced growth path.

Keywords: Social status; Norms; Economic growth; Cycles (search for similar items in EconPapers)
JEL-codes: E32 O42 Z10 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-ent, nep-gro, nep-ino, nep-mac, nep-soc and nep-upt
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