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Social Capital and the Status Externality

Jun-ichi Itaya () and Chris Tsoukis

No 6820, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper investigates how the presence of social capital affects the externality arising from status-seeking preference as a parable for inefficient antagonistic behavior. It is assumed that the stock of social capital is accumulating through joint social interaction between rational individuals who are forward looking. Using a differential game, we show that although the presence of social capital mitigates the tendency of overconsumption over time, social capital ends up declining to zero. It is also shown that the benefits from social capital enhance the motivation of individuals to accumulate social capital thereby leading to deter overaccumulation and thus possibly improving social welfare.

Keywords: social capital; status externality; Markov perfect; equilibrium; differential game (search for similar items in EconPapers)
JEL-codes: O40 Q33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-soc and nep-ure
Date: 2017
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