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Status and Poverty

Omer Moav () and Zvika Neeman ()

Journal of the European Economic Association, 2010, vol. 8, issue 2-3, 413-420

Abstract: We present a model in which individuals' preferences are defined over their consumption, transfers to offspring, and social status associated with income. We show that a separating equilibrium exists where individuals' expenditure on conspicuous consumption is a signal for their unobserved income. In this equilibrium, poor families that climb up the social ladder by the accumulation of wealth engage in conspicuous consumption that prevents them from escaping poverty. Our model may explain why the poor make some choices that do not appear to help them escape poverty. (JEL: D91, O11, O12, O15) (c) 2010 by the European Economic Association.

JEL-codes: D91 O11 O12 O15 (search for similar items in EconPapers)
Date: 2010
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