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The Quest for Status and Endogenous Labor Supply: The Relative Wealth Framework

Walter Fisher, IHS-Vienna and Franz X. Hof
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Franz X. Hof: Vienna University of Technology

No 60, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: This paper introduces the quest for status into the Ramsey model with endogenous labor supply. We focus our attention on relative wealth preferences. In contrast to relative consumption preferences, they allow for the possibility that agents work too little in the long run, while under both specifications the steady-state levels of consumption and the stock of physical capital exceed their socially optimal counterparts. The initial phase of transitional dynamics is unambiguously characterized by under-consumption and excessive work effort. The social optimum can be replicated by taxing capital income, where the optimal tax rate increases as physical capital accumulates.

Keywords: Status; Relative Consumption; Relative Wealth; Endogenous Labor Supply (search for similar items in EconPapers)
JEL-codes: D62 D91 E21 (search for similar items in EconPapers)
Date: 2006-07-04
New Economics Papers: this item is included in nep-lab and nep-mac
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Journal Article: The quest for status and endogenous labor supply: the relative wealth framework (2008) Downloads
Working Paper: The Quest for Status and Endogenous Labor Supply. The Relative Wealth Framework (2005) Downloads
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