Wealth distribution, endogenous fiscal policy and growth: status-seeking implications

Thi Kim Cuong Pham (pham_tkc@parisnanterre.fr)

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: We investigate the wealth distribution and endogenous fiscal policy in a two-classes growth model in which individuals exhibit a desire for social status. The latter is in- creasing with individual wealth and decreasing with the average level of the society. First, we show that status seeking is crucial in determining the long-run wealth dis- tribution: agents with stronger status motive end up holding a higher level of wealth. Second, a higher inequality can be associated with a higher growth if it is due to a stronger incentive to accumulate wealth of one class of agents. Third, the model implies that a higher growth rate may reduce welfare of one class of agents and raise welfare of the other one. Finally, when fiscal policy is determined through a voting mechanism, an increase in the strength of status motive of majoritarian class may lead to a reduced political equilibrium growth.

Keywords: Individual welfare; endogenous growth; endogenous Þscal policy; status seeking; wealth distribution (search for similar items in EconPapers)
JEL-codes: D31 H31 H50 O41 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-dev, nep-dge, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2004-11

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