Keeping Up with or Running Away from the Joneses: the Barro Model Revisited

Thi Kim Cuong Pham ()

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

Abstract: This paper reexamines the Barro growth model in a context of individualpreferences with consumption externality. Agents care about both consumption and social status, which is determined by their relative consumption in society. The results underline the individuals' preferences for status as a key role in explaining long term growth and welfare. In particular, a higher growth rate may correspond to a lower social welfare if increment in growth is explained by status-seeking a companied by the keeping up with the Joneses. Furthermore, we discuss two public financing systems from the viewpoint of growth and welfare.If lump-sum tax always implies a higher growth rate, income tax may perform better in terms of welfare when government size becomes sufficiently large.

Keywords: Income tax; lump-sum tax; keeping up with the Joneses; public spending; running away from the Joneses; status-seeking. (search for similar items in EconPapers)
JEL-codes: D90 H20 H54 O41 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-pbe
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Related works:
Journal Article: Keeping up with or running away from the Joneses: the Barro model revisited (2019)
Working Paper: Keeping up with or running away from the Joneses: the Barro model revisited (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2018-29

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