Status-seeking culture and development of capitalism

Angus Chu, Haichao Fan and Xilin Wang

Journal of Economic Behavior & Organization, 2020, vol. 180, issue C, 275-290

Abstract: According to Werner Sombart’s classic text Luxury and Capitalism, the status-seeking behavior of individuals may facilitate the development of capitalism and an early industrialization. In this study, we develop a growth-theoretic framework to formalize this hypothesis by introducing a status-seeking preference into the Schumpeterian growth model of endogenous takeoff. Then, we explore how this cultural preference affects the transition of an economy from pre-industrial stagnation to modern economic growth. We find that the effects of status-seeking behaviors evolve across different stages of economic development. Specifically, a stronger preference for status seeking causes an earlier takeoff and increases economic growth in the short run but has an overall negative effect on the steady-state equilibrium growth rate. Finally, we calibrate the model to US data to perform a quantitative analysis and also use cross-country data to estimate the effects of status-seeking preference on economic growth.

Keywords: Status seeking; Endogenous takeoff; Innovation (search for similar items in EconPapers)
JEL-codes: O30 O40 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Working Paper: Status-Seeking Culture and Development of Capitalism (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:180:y:2020:i:c:p:275-290

DOI: 10.1016/j.jebo.2020.10.010

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