The quest for status and R&D-based growth

Franz X. Hof and Klaus Prettner

Journal of Economic Behavior & Organization, 2019, vol. 162, issue C, 290-307

Abstract: We analyze the effect of status preferences on R&D-based economic growth. 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 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. Finally, we show how the inefficiency of the decentralized balanced growth path is affected by allowing the various assets to differ with respect to their status relevance.

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: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: The quest for status and R&D-based growth (2016)
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:eee:jeborg:v:162:y:2019:i:c:p:290-307

DOI: 10.1016/j.jebo.2019.01.012

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