Status-Seeking Culture and Development of Capitalism

Angus Chu and Xilin Wang

MPRA Paper from University Library of Munich, Germany

Abstract: According to Werner Sombart's classic text Luxury and Capitalism, the status-seeking behavior of individuals may facilitate the development of capitalism and give rise to 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 use the model to explore how this cultural preference affects the transition of an economy from pre-industrial stagnation to modern economic growth. We find that a stronger preference for status seeking causes an earlier takeoff and a positive effect on economic growth in the short run but an overall ambiguous effect on growth in the long run. We also calibrate the model to data to perform a quantitative analysis and find that a stronger status-seeking preference reduces the steady-state equilibrium growth rate under reasonable parameter values. Therefore, the effects of status-seeking behaviors evolve across different stages of economic development.

Keywords: status seeking; endogenous takeoff; innovation (search for similar items in EconPapers)
JEL-codes: O3 O4 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-evo, nep-gro and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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https://mpra.ub.uni-muenchen.de/102741/1/MPRA_paper_102741.pdf revised version (application/pdf)

Related works:
Journal Article: Status-seeking culture and development of capitalism (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:100023

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