The quest for status and R&D-based growth

Franz X. Hof and Klaus Prettner

No 12-2016, Hohenheim Discussion Papers in Business, Economics and Social Sciences from University of Hohenheim, Faculty of Business, Economics and Social Sciences

Abstract: We analyze the impact of status preferences on technological progress and long-run economic growth within an R&D-based framework. For this purpose, we extend the standard relative wealth approach by allowing the various assets held by households to differ with respect to their status relevance. Relative wealth preferences imply that the effective rate of return on saving in the form of a particular asset is the sum of its market rate of return and its status-related extra return. We show that the status relevance of shares issued by entrants to finance the purchase of new technologies is of crucial importance for long-run growth: First, an increase in the intensity of the quest for status raises the steady-state economic growth rate only if the status-related extra return of these shares is strictly positive. Second, for any given degree of status consciousness, the long-run economic growth rate depends positively on the relative status relevance of shares issued by entrants. Third, while the decentralized long-run economic growth rate is less than its socially optimal counterpart in the standard model, wealth externalities reduce this distortion.

Keywords: status concerns; relative wealth; technological progress; long-run economic growth; social optimality (search for similar items in EconPapers)
JEL-codes: D31 D62 O10 O30 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cse, nep-gro and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The quest for status and R&D-based growth (2019)
Working Paper: The quest for status and R&D-based growth (2016)
Working Paper: The Quest for Status and R&D-based Growth (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hohdps:122016

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