Income inequality and saving in a class society: The role of ordinal status

Rein Haagsma

No 2018-12, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper examines the impact of income growth and income inequality on household saving rates and payoffs in a non-cooperative game where each player's payoff depends on her present and future consumption and her rank in the present-consumption distribution. The setting is a pooling equilibrium with three clusters of successive income groups, each cluster having its own present-consumption standard and rank in the present-consumption distribution. In this way the analysis addresses the saving behaviour and welfare of three social classes: the lower, middle and upper class. The author finds explanations for the Easterlin paradox and the Kuznets consumption puzzle and concludes that rank concerns tend to weaken the standard effect of inequality on aggregate saving.

Keywords: status; relative consumption; saving; income inequality; income growth (search for similar items in EconPapers)
JEL-codes: C72 D31 D62 E21 I31 Z10 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.economics-ejournal.org/economics/discussionpapers/2018-12
https://www.econstor.eu/bitstream/10419/174589/1/1013729765.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201812

Access Statistics for this paper

More papers in Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).