Incorporating concern for relative wealth into economic models

Harold Cole, George Mailath and Andrew Postlewaite

Quarterly Review, 1995, vol. 19, issue Sum, 12-21

Abstract: This article develops a simple model that captures a concern for relative standing, or status. This concern is instrumental, in the sense that individuals do not get utility directly from their relative standing, but, rather, the concern is induced because their relative standing affects their consumption of standard commodities. The article investigates the consequences of a concern for relative wealth in models in which individuals are making labor/leisure decisions. The analysis shows how individuals' decisions are affected by the aggregate income distribution and how the concern for relative wealth can generate behavior that can be interpreted as conspicuous consumption when wealth is not directly observable.

Keywords: Consumption (Economics); Wealth (search for similar items in EconPapers)
Date: 1995
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
http://minneapolisfed.org/research/qr/qr1932.pdf (application/pdf)
http://minneapolisfed.org/research/qr/qr1932.html (text/html)

Related works:
Working Paper: Incorporating Concern for Relative Wealth into Economic Models'
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:fip:fedmqr:y:1995:i:sum:p:12-21:n:v.19no.3

Access Statistics for this article

More articles in Quarterly Review from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().