Consumption externalities, elastic labor supply and wealth distribution

Issa Sanou

Economic Modelling, 2024, vol. 137, issue C

Abstract: This study employs a neoclassical growth model to investigate the impact of consumption externalities on the distribution of wealth. It also jointly accounts for heterogeneity in the degree of consumption externalities, heterogeneity in the initial wealth endowments, and endogenous labor supply. First, we demonstrate that catching-up occurs when an initially poorer household works more than an initially wealthier one, after which the additional income acquired through hard work offsets the initial wealth difference. Second, a reduction in wealth inequality is only consistent and systematic if an initially wealthier household works relatively less than the social average. When this condition is not met, a reduction in wealth inequality only occurs if the initial wealth is highly and unevenly distributed.

Keywords: Consumption externalities; Heterogeneous conformism; Status-seeking; Endogenous labor supply; Wealth inequality; Catching-up (search for similar items in EconPapers)
JEL-codes: D31 D62 D91 E13 J22 O41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999324001111
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:137:y:2024:i:c:s0264999324001111

DOI: 10.1016/j.econmod.2024.106755

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().