Social inclusion and the emergence of development traps
Discussion Papers from D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy
This paper argues that individual concerns for relative position contribute to the emergence of development traps. It demonstrates that changes in the mean and the distribution of income qualitatively modify individual reference groups by affecting the magnitude of the reference standard. Over time, this effect influences the dynamical transition of within-dynasty incomes and drives the emergence of development traps. In particular, an increase in mean income and a reduction of inequality cause an increase in the reference standard, inducing, in the long-run, the transition from a Solovian-type stage to a development traps regime as agents need to sacrifice relatively more resources in order to keep up with the reference group.
Keywords: Social inclusion; keeping up with the Joneses; development traps; unified growth theory. (search for similar items in EconPapers)
JEL-codes: D31 D91 O15 O40 (search for similar items in EconPapers)
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Working Paper: Social inclusion and the emergence of development traps (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:prt:dpaper:1_2012
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