occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

keep up with the winners experimental evidence on risk taking asset integration and peer effects the paper reports the result of an experimental game on asset integration and risk taking we find some evidence that winnings in earlier rounds affect risk taking in subsequent rounds but no evidence that real life wealth outside the experiment affects risk taking controlling for past winnings participants receiving a low endowment in a round engage in more risk taking we test a keeping up with the joneses hypothesis and find that subjects seek to keep up with winners though not necessarily with average earnings overall the evidence suggests that risk taking tracks a reference point affected by social comparisons

income distribution and growth the kuznets hypothesis revisited this study develops a general equilibrium model in which the evolution of income inequality and output conforms with the kuznets hypothesis the paper presents a novel endogenous mechanism that generates the inverted u relation between income inequality and per capita output and captures the reciprocal influence between the two unlike previous attempts for a comprehensive theoretical modelling of this phenomenon the evolution of the economy is consistent with another important empirical observation namely that output growth is accompanied in the early stages of development by a widening wage differential between skilled and unskilled labour whereas in a later stage this wage differential declines this study develops a general equilibrium model in which the evolution of income inequality and output conforms with the kuznets hypothesis the paper presents a novel endogenous mechanism that generates the inverted u relation between income inequality and per capita output and captures the reciprocal influence between the two unlike previous attempts for a compre hensive theoretical modelling of this phenomenon the economic evolution is consistent with another important empirical observation namely that output growth is accompanied in early stages of development by a widening wage differential between skilled and unskilled labour whereas in a later stage this wage differential declines the relationship between the distribution of income and economic growth has been a focus of research for several decades in a seminal contribution kuznets 1955 explored the historical evolution of income distribution and per capita output his study demonstrated that income inequality widens in the early phase of economic growth and narrows in the later stage of development kuznets s inverted u hypothesis has been debated in the last few decades and has been confirmed by a large number of cross section empirical studies and refuted by others time series analysis indicates that the hypothesis is consist 2 ent with the experience of most of the developed world furthermore these studies suggest that output growth is accompanied in early stages of develop ment by a widening wage differential between skilled and unskilled labour and that in a later stage this wage differential declines see e g williamson 1985 throughout the years the link between income distribution and economic growth has been interpreted mostly as a causal relation from growth to income distribution recently however the nature of this link has been re examined and attention has been paid to the causality in the other direction galor and zeira 1993 have demonstrated that owing to borrowing constraints income

occupation induced status social norms and economic growth abstract we analyse a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods in addition to their varying pecuniary returns different projects also vary with respect to the status they confer to the entrepreneurs who operate them we show that i social status increases the growth rate but this effect is mitigated by a social norm that inversely links overall levels of employment in the high return project with the status conferred to it ii the combined effect of social status and inflation is a source of transitional dynamics in an environment where such dynamics would not emerge if considerations of occupational prestige were absent iii when the social norm affects social status the economy s dynamics may be manifested in the form of endogenous volatility iv the presence and characteristics of social status can generate a negative correlation between volatility and growth

inequality and violent crime abstract we investigate the robustness and causality of the link between income inequality and violent crime across countries first we study the correlation between the gini index and homicide and robbery rates within and between countries second we examine the partial correlation by considering other crime determinants third we control for the endogeneity of inequality by isolating its exogenous impact on these crime rates fourth we control for measurement error in crime rates by modeling it as both unobserved country effects and random noise finally we examine the robustness of this partial correlation to alternative measures of inequality the panel data consist of nonoverlapping 5 year averages for 39 countries during 1965 95 for homicides and 37 countries during 1970 94 for robberies crime rates and inequality are positively correlated within countries and particularly between countries and this correlation reflects causation from inequality to crime rates even after controlling for ot

trends in fuel and energy use and programmes for energy conservation by economic sector in the ussr abstract this paper describes the principal patterns of soviet domestic energy consumption and presents the specific soviet programme for energy conservation in individual sectors of the economy and industry the paper also presents the principal aspects of a new soviet energy programme still under development that apparently will soon be officially released some preliminary assessments are offered on what might be achieved the ambitious conservation goals promulgated in the new energy programme do not appear likely to be met

rank matters the impact of social competition on portfolio choice tournament incentives schemes have been criticized for inducing excessive risk taking among financial market participants in this paper we investigate how relative performance based incentive schemes and status concerns for higher rank influence portfolio choice in laboratory experiments we find that both underperformers and over performers adapt their portfolios to their current relative performance preferring either positively or negatively skewed assets respectively most importantly these results hold both when relative performance is instrumental for higher payoffs in a tournament and when it is only intrinsically motivating and not payout relevant we find no effects when no relative performance information is given

social comparisons and contributions to online communities a field experiment on movielens we design a field experiment to explore the use of social comparison to increase contributions to an online community we find that after receiving behavioral information about the median user s total number of movie ratings users below the median demonstrate a 530 percent increase in the number of monthly movie ratings while those above the median decrease their ratings by 62 percent when given outcome information about the average user s net benefit score above average users mainly engage in activities that help others our findings suggest that effective personalized social information can increase the level of public goods provision

energy conservation policies in the oecd did they make a difference abstract in 1985 homes services automobiles truck freight air passenger traffic other transport and manufacturing in the oecd used 47 million bbl day of oil equivalent mb doe or 105 000 pj 1 between 1972 and 1985 however energy use per unit of activity in each of these sectors in the oecd fell significantly if these energy intensities by sector had been frozen at their 1972 values 1985 end use would have been close to 64 mb doe or 143 000 pj at the rates of activity that prevailed in each sector in 1985 2 the difference yields a saving of 17 mb doe the corresponding oil savings in this period amount to close to 12 mb doe including substitution by other fuels in this paper it is suggested that most of these savings will not reverse in the near time with lower oil prices only a small part was caused by energy conservation policies

status intertemporal choice and risk taking this paper takes the position that an individual s concern for relative status is expressed in her preferences we embed this hypothesis in an otherwise conventional model of economic growth and examine its consequences the model generates two kinds of equilibrium in the first all individuals always follow a deterministic consumption and investment strategy such a strategy must be linear in output is independent of payo s and technology and only depends on the discount factor this sort of equilibrium exists when the individual cares only about status and the individual production function is convex in investment in contrast the other kind of equilibrium involves convergence to a steady state in which there is persistent and endogenously generated gambling this kind of equilibrium exists in more plausible circumstances the individual has a utility function that may depend on consumption per se as well as implied status and individual production functions are concave we characterize the unique steady state in such a situation and prove that any dynamic equilibrium path must converge to it risk taking arises not from the presumption of a utility function with strictly convex segments as in friedman savage but naturally from a view of utility as depending on relative status our steady state is broadly consistent with the stylized facts that individuals both insure downside risk and to gamble over upside risk and generates similar patterns of risk taking and avoidance across environments with quite di erent overall wealth levels finally in contrast to friedman 1953 endogenous risk taking here is generally pareto ine cient

human capital kuznets curve with subsistence consumption level abstract we examine the human capital kuznets curve in a simple model that does not assume increasing returns to scale in human capital formation with a utility function that specifies a subsistence consumption level consumption is a necessary good and education is a luxury good as the children of poor households receive a low level of education the gap in human capital endowments expands between poor and rich households eventually economic development increases income and expenditure for education and income inequality declines

macroeconomic implications of conspicuous consumption a sombartian dynamic model this chapter presents a dynamic general equilibrium model in which consumers have status preference i investigate the manner in which capital accumulation is impeded by conspicuous consumption a la corneo and jeanne j public econ 66 55 71 1997a following the literature social norms are given as either bandwagon type or snob type i then show that when the economy is characterized by a bandwagon type social norm capital accumulation exhibits interesting patterns those patterns include for example an oscillating convergence path the rise of the economy feeds its decay through conspicuous consumption and that decay suppresses conspicuous consumption and engenders prosperity as predicted by sombart liebe luxus und kapitalismus reprinted 1967 deutscher taschenbuch verlag munchen 1912

optimal income tax in the presence of status effects abstract the existence of distortions from individuals competing to attain social status by using consumption signals justifies some measure of income tax as a counter acting distortion the question posed here is whether it also constitutes a reason for a more progressive income tax schedule the answer is found to be broadly negative if progressiveness is interpreted as a more convex tax schedule unless the rich are more concerned with status seeking than the poor on the other hand status seeking makes the optimal tax schedule steeper so that redistribution is increased essentially the analysis of status seeking based on a signaling approach confirms and strengthens the existing view of an optimal tax schedule and can be incorporated into the diamond american economic review 88 1998 83 95 approach

the social contingency of wants abstract economic models typically assume that individual wants are determined by forces exogenous to the economic system social psychology and consumer research in contrast support the view that the perceived benefits of goods and services are strongly affected by endogenously determined social norms we present a selective overview of the literature on the relationship between consumption and well being exploring the ways in which informal arguments from social science might be linked to formal models of economic behavior we find that the fixed preferences hypothesis leads to the systematic undervaluation of environmental services and the underprovisioning of environmental goods

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

inequality and crime this paper considers the relationship between inequality and crime using data from urban counties the behavior of property and violent crime are quite different inequality has no effect on property crime but a strong and robust impact on violent crime with an elasticity above 0 5 by contrast poverty and police activity have significant effects on property crime but little on violent crime property crime is well explained by the economic theory of crime while violent crime is better explained by strain and social disorganization theories

energy use in the service sector an international perspective abstract this study presents the first international comparison of energy use and structure in the service sector of major oecd countries this sector includes offices hospitals schools stores and other buildings commonly referred to as commercial buildings the authors separate service sector energy use from other sectors examine differences in fuel mix energy intensity electricity use and conservation experience as well as fundamental differences in the extent and make up of the building stock and the climate most countries are seen to have reduced energy intensity since 1973 all have reduced the share of heating oil and increased the use of electricity both for space conditioning as well as for other building services the authors find that energy intensity in us commercial and institutional buildings is among the highest in the oecd while electricity intensities in norway canada the usa and sweden are well above those in other countries

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

economic development urban underemployment and income inequality the evolution of income inequality during the course of economic development is investigated the source of inequality is market luck in obtaining employment in the protected urban formal sector versus employment in the unprotected urban informal sector it is shown that with development inequality tends to follow an inverted u it rises when urbanization is low and consequent pressure on the land keeps rural incomes low making agents willing to incur high risks of underemployment in the urban informal sector it eventually falls after urbanization and consequently rural incomes have increased sufficiently to allow agents to make better than even bets in the urban industrial sector

incentive compatibility in signaling games with a continuum of types on donne deux resultats utiles pour demontrer l existence et pour caracteriser des equilibres de separation dans des jeux de signalement

on the evolution of attitudes towards risk in winner take all games abstract a long standing conjecture is that winner take all games such as patent races lead to the survival of risk takers and the extinction of risk averters in many species a winner take all game determines the males right to reproduce and the same argument suggests that males will evolve to be risk takers psychological and sociological evidence buttresses the argument that males are more risk taking than females using an evolutionary model of preference formation we investigate to what extent evolution leads to risk taking in winner take all environments journal of economic literature classification numbers c7 d8

on the political economy of income redistribution and crime this article analyzes a general equilibrium model in which agents choose to specialize in either legitimate or criminal activities expenditures on police to apprehend criminals as well as income redistribution are determined endogenously through majority voting we investigate how crime redistribution and police expenditures depend on characteristics of the underlying distribution of income earning abilities and on the apprehension technology our model accounts for the positive correlation between inequality and crime the positive correlation between expenditures on police and redistribution and the lack of correlation between crime and redistribution observed in u s data

the evolution of attitudes to risk lottery tickets and relative wealth abstract individual attitudes to risk are examined in an evolutionary model males obtain more offspring as a consequence of greater wealth both directly and because this attracts more mates the second effect induces gambling driven by relative wealth and can create pareto inefficiency fair bets involving small losses and large gains are taken if any fair bets at all are taken altogether the model accords with observations concerning bets taken and declined by typical individuals despite settings of widely varying per capita wealth journal of economic literature classification numbers c72 d81

unequal english wealth since 1670 new data on probated wealth landownership debts and occupations extend our view of the distribution of english wealth back from 1911 to 1670 there were widening gaps in mean wealth between the top landed plus merchant classes and the middle classes across the industrial revolution century size distributions for individual assets also widened so did those for income or total wealth including human but nonhuman net worth did not become more unequal because of important shifts in the land share all inequality measures before 1914 exceeded all those since 1950 the estimates illuminate classical theories of distribution

structural optimization and carbon taxation in china s commercial sector abstract given china s economic transformation and upgrading process the green development of commercial sector is more and more important based on the trans log cost function this paper calculates the inter factor and inter fuel substitution effects in china s commercial sector from 1980 to 2016 besides the paper further analyzes the driving factors of the dynamic changes in energy intensity and the impact of carbon taxation in china s commercial sector the main conclusions are as follows 1 capital labor and energy in china s commercial sector negatively correlate with their prices and the self price elasticities of energy labor and capital decline in turn 2 the relationship between labor and capital is substitutional and the same relationship is found when after considering labor and energy and that between energy and capital is complementary 3 demand for energy sources negatively correlates with their prices and there exist complementary relationships between energy sources 4 technical effects and substitution effects can effectively promote the decline of energy intensity in china s commercial sector 5 implementing a 50 rmb tonne carbon taxation will lead to 5 50 energy savings and 6 21 co2 reduction

of tournaments and temptations an analysis of managerial incentives in the mutual fund industry we test the hypothesis that when their compensation is linked to relative performance managers of investment portfolios likely to end up as losers will manipulate fund risk differently than those managing portfolios likely to be winners an empirical investigation of the performance of 334 growth oriented mutual funds during 1976 to 1991 demonstrates that mid year losers tend to increase fund volatility in the latter part of an annual assessment period to a greater extent than mid year winners furthermore we show that this effect became stronger as industry growth and investor awareness of fund performance increased over time

a dynamic theory of the transition to democracy abstract a model of the transition to democracy is presented within a dynamic general equilibrium framework we demonstrate that democratic transitions occur endogenously in the course of economic growth or with economic contraction being fundamentally driven by the economic position of the middle class democratic transitions can occur rapidly or slowly because the autocrat faces an informational asymmetry regarding the effect of his policies on the political economic environment the model shows that the primary factors affecting the speed of democratic transitions are inequality the planning horizon of the autocrat the autocrat s perceived legitimacy and the rate of economic growth

energy and environmental evaluation of municipal facilities case study in the province of barcelona abstract the service sector is extraordinarily important for the european economy as it accounts for 75 of the gdp yet it is also a huge consumer of energy especially in urban environments municipalities have the authority to develop and manage municipal services and as a result the european commission drew up the covenant of mayors in which the signatory municipalities pledge to reduce their co 2 emissions by 20 of their 1990 rates sustainable energy action plans seaps emerged from this covenant with the goal of analysing the current consumption patterns and compiling the actions that the municipalities should undertake in order to fulfil their pledges this article focuses on analysing the energy consumption and greenhouse gas emissions of 978 municipal service facilities in the province of barcelona in the year 2005 the average consumption per facility by surface area is 118 8 kwh m 2 regarding greenhouse gas emissions the average annual emissions in the facilities studied in the province of barcelona were 40 0 kg co 2 eq m 2

improved energy efficiency in the industrialized countries past achievements co2 emission prospects abstract this paper explores the contribution which energy efficiency might make to future reductions in co 2 emissions trends in key energy use sectors and recent changes that may signal a slowdown in the rate of improvement of energy efficiency are examined the oecd countries reduced their energy use through greater efficiency by nearly 32 ej or 16 million bbl day oil equivalent between 1972 and 1985 but the pace of these improvements in energy use has begun to slow prospects for increased efficiency in each sector and the barriers to achieving those increases are discussed

the long term relationships among china s energy consumption sources and adjustments to its renewable energy policy abstract to reduce its consumption of coal and oil in its primary energy consumption china promotes the development of renewable energy resources i have analysed the long term relationship among china s primary energy consumption sources changes in coal consumption lead those in the consumption of other energy sources in the long term coal and oil fuels substitute for each other equally the long term elasticities of china s coal consumption relative to its hydroelectricity consumption were greater than one and nearly equal during the two sample periods therefore increased hydroelectricity consumption did not imply a reduction in coal consumption china holds abundant hydroelectricity wind and solar energy potential china must prevent an excessive escalation of its economy and resultant energy demand to realise a meaningful substitution of coal with hydroelectricity moreover china must develop and use wind and solar energy sources natural gas can be a good substitute for coal given its moderate price growth and affordable price levels

analysis of energy use and co2 emission in service industries evidence from sweden this study analyses the trends in energy use and co2 emissions for 19 sub sectors in the swedish service sectors following the classification of the international standard industrial classification

inequality and risk taking behaviour this paper investigates social in uences on attitudes to risk and ofiers an evolutionary explanation of risk taking by young low ranked males becker murphy and werning 2005 found that individuals about to participate in a status tournament may take fair gambles even though they are risk averse in both wealth and status here their model is generalised by use of the insight of hopkins and kornienko 2010 that in a tournament or status competition one can consider equality in terms of the status or rewards available as well as in initial endowments while becker et al found that risk taking is increasing in the equality of initial endowments it is found here that it is increasing in the inequality of rewards in the tournament further it is shown that the poorest will be risk loving if the lowest level of status awarded is su ciently low thus the disadvantaged in society rationally engage in risky behavior when social rewards are su ciently unequal finally as greater inequality in terms of social status induces gambling it can cause greater inequality of wealth

running to keep in the same place consumer choice as a game of status if individuals care about their status defined as their rank in the distribution of consumption of one positional good then the consumer s problem is strategic as her utility depends on the consumption choices of others in the symmetric nash equilibrium each individual spends an inefficiently high amount on the status good using techniques from auction theory we analyze the effects of exogenous changes in the distribution of income in a richer society almost all individuals spend more on conspicuous consumption and individual utility is lower at each income level in a more equal society the poor are worse off

competing premarital investments this paper studies premarital parental investments in children s wealth where spousal wealth is a public good in marriage by investing in their children s wealth parents increase the wealth of their children and the quality of the spouses that their children can marry in large marriage markets the hedonic return to investment internalizes all the external benefits of premarital investment in wealth so that the competitive equilibrium is efficient marriage market competition also increases investments in small marriage markets relative to no competition but equilibrium investments are not efficient

on the rebound feedback between energy intensities and energy uses in iea countries abstract the interaction or feedback between energy efficiencies or energy intensities and energy use has long been the topic of debate some have argued that energy efficiency improvements by reducing energy intensities and therefore lowering the cost of energy services would lead to rebound effects offsetting much or all of any initial savings in energy in this paper we analyse historical data on energy use efficiency and pricing in different sectors to try and identify rebounds for the period of our data since about 1970 we show that key measures of activity car use manufacturing output and structure house area etc have changed little in response to changes in energy prices or efficiency instead continuing their long term evolution relative to gdp or other driving factors while our analysis cannot disentangle more macro level economic feedbacks in a detailed way we show indirectly that such effects also appear to have been small over the 1970s and 1980s overall our analysis of disaggregated sectoral and subsectoral energy use and activity trends in a variety of iea economies suggests that any feedback effect is small compared to both the effects on energy use of changes in energy intensities and overall economic growth we conclude that most of the improvements in energy efficiencies led to reductions in energy intensities observed in the 1970s and 1980s weighted by 1990 activity levels intensities were roughly 15 20 lower in 1994 5 than in 1973 which in turn meant real savings of energy energy demand in iea countries is roughly this much below what it would have been for the same gdp had these savings not occurred rebounds may have taken back some of the overall savings but most remain even after the fall of oil prices in 1986 any boost to gdp as a result of these savings could not have been sufficient to increase energy demand enough to significantly alter these conclusions that the savings remained after the fall in oil prices supports the notion that net savings restrained energy growth relative to gdp in some formulations arise from technological progress even if energy prices do not increase how far this effect can reach however is a matter of considerable debate

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

fuel conserving and using production functions abstract this article compares eight production cost functions used or potentially useful for exploring how energy efficiency gains affect energy consumption we show the practitioner s choice of function can inadvertently pre determine results and make recommendations as to which functions are flexible enough to prevent this we also show pre selected factor substitution elasticities can similarly pre determine results to aid the comparison we decompose the energy consumption rebound effect into intensity and output income effects which also delivers insight into the mechanisms of rebound we conclude by recommending practitioners restrict themselves to either the gallant fourier or the generalized leontief symmetric generalized barnett cost functions as being sufficiently rebound flexible the translog cost function may be suitable given certain conditions and a particular form of the ces solow function is a possible but problematic candidate along the way the article provides a general methodology for similarly examining any arbitrarily defined constant returns to scale production or cost function

the effect of unionism on fringe benefits this study analyzes the impact of unionism on fringes paid to production workers using data on individual establishments it compares fringe expenditures in establishments having the same level of compensation per hour and finds that unionism raises the share of compensation allotted to fringes particularly to pensions vacation pay and life accident and health insurance in addition since unionism also raises the straight time wage rate itself a prime determinant of expenditures on fringes unionism has a very sizeable impact on total fringe expenditures as well as on the fringe share of compensation the union fringe effect exceeds in percentage terms the union wage effect and is sufficiently large to suggest that standard union wage studies understate the union effect on total compensation the study also compares the fringe expenditures of production and non production workers within the same establishment controlling for within establishment pay policies the findings suggest that the pres

educational expansion and schooling inequality international evidence and some implications fairly recent data for about 100 countries indicate that as the average level of schooling increases educational inequality first increases and after reaching a peak starts declining in later phases of educational expansion the turning point occurs when average schooling is about seven years the observed empirical generalization which seems quite robust appears to have important implications for educational and distributional policies and for research on the linkage between education and income inequality

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

positional deprivation and support for radical right and radical left parties we explore how support for radical parties of both the left and right may be shaped by what we call positional deprivation where growth in income of individuals at a given point in the income distribution is outpaced by income growth elsewhere in that distribution we argue that positional deprivation captures the combination of over time and relative misfortune that can be expected to distinctly spur support for radical left and right parties we explore this possibility by matching new measures of positional deprivation to individual level survey data on party preferences in 20 european countries from 2002 to 2014 we find that positional deprivation is robustly correlated with supporting radical populist parties first positional deprivation generally measured as average income growth across deciles of a country s income distribution minus a respondent s own decile s growth is associated with respondents retreat from mainstream parties and with support for both radical right and particularly radical left parties second positional deprivation relative to the highest and the lowest ends of the income spectrum play out differently for radical right and for radical left support a respondent s positional deprivation relative to the wealthiest decile s growth in his or her country tends to spur support for radical left but not radical right parties in contrast positional deprivation relative to the poorest decile s growth in a respondent s country tends to spur support for radical right but not left parties the results suggest that the combination of over time and relative economic misfortune may be key to how economic experience shapes radical backlash of the left and right

efficient equilibrium convergence heterogeneity and growth abstract an endogenous growth model arising from task specialization is used to examine the effects of differing initial human capital distributions two macroeconomic phenomena are produced income convergence and leapfrogging of living standards income convergence occurs for all countries in the same market arising from diminishing returns to individual human capital leapfrogging occurs by comparing countries in two separate markets income leapfrogging can occur because the stationary growth rate increases with market size and human capital heterogeneity reduces growth the introduction of coordination costs of task assignment can produce gains in welfare and growth from human capital heterogeneity

the equilibrium distribution of income and the market for status this paper explores the implications for risk taking behavior and the equilibrium distribution of income of assuming that the desire for status positions is a powerful motive and that it raises the marginal utility of consumption in contrast to previous analyses we consider the case in which status positions are sold in a hedonic market we show that such a complete hedonic market in status positions can be perfectly replicated by a simpler arrangement with a status good and a social norm that assigns higher status to those that consume more of this good the main result is that for a wide range of initial conditions the equilibrium distribution over income status and consumption is the same that this allocation requires inequality of income and consumption and that this allocation coincides with the optimum of a utilitarian planner

inequality and development across and within countries summary this paper provides a cross country comparison of how income inequality has evolved within countries at different levels of development it uses overlapping nonparametric regression which allows visual comparisons of inequality both within and across countries as a result the methodology allows more specific conclusions than cross country regressions and yet is more general than within country case studies the approach highlights the problematic conclusions that can arise with parametric regressions in particular with tests of the kuznets curve while some previous results are confirmed some new results on inequality across countries are also discovered

dynamic asset allocation with relative wealth concerns in incomplete markets abstract in dynamic portfolio choice problems stochastic state variables such as stochastic volatility lead to adjustments of the optimal stock demand referred to as hedge terms or merton breeden terms by deriving an explicit solution in a two agent framework with a stochastic opportunity set we show that relative wealth concerns give rise to new hedge terms beyond the ordinary ones this is because the agents hedge against both exogenous changes in the state variable and endogenous decisions of the other agent depending on the parametrization of the model these new terms can significantly change the investors hedging demands we also show that both heterogeneity in risk aversion or relative wealth concerns can have similar effects on the heterogeneity in portfolio decisions formally we study a non cooperative non zero sum stochastic differential game for which we prove a verification theorem in a setting with an unspanned state variable

relative consumption and tax evasion abstract relative consumption effects or status concerns that feature jealousy in the sense of dupor and liu 2003 boost consumption expenditure if consumption is financed by labour income such status considerations increase labour supply and hence the tax base a higher taxable income in turn can make tax evasion more attractive we show for various specifications of preferences that the tax base effect generally dominates consequently relative consumption effects tend to reduce tax evasion this is true irrespective of whether tax parameters are exogenous guarantee a balanced budget or are set optimally

diagram for a small planet the production and ecosystem possibilities curve abstract with the development of the gpi there is now an ecological alternative to gdp for measuring a country s economic performance but we still lack an ecological alternative to the ppc for illustrating a country s economic problem the diagram suggested here illustrates a country s production and ecosystem possibilities including climate stability flood control carbon sequestration aquifer recharge scenery recreation biological diversity and so on burning a rainforest to clear the land shifts a country s ppc outward giving the visual impression of an unmitigated improvement but such development causes a movement along the country s pepc as ecosystem services are transformed into gdp the slope of the pepc is the marginal rate of transformation which equals the ratio of the land s marginal marketable product to its marginal ecosystem product changes in technology create substitution and income effects that help explain the enclosure movement and the environmental kuznets curve much as employment of the human resource can be restrained to allow more leisure development of the natural resource can be restrained to preserve more ecosystem services commercial lobbying interests and rivalries for positional goods create distortions that move a country along its pepc to a materialistic misallocation with too little conservation an idealistic misallocation is also possible with too much preservation of the natural environment small is beautiful up to a point and that is evident in this diagram jacob viner s viner j 1937 studies in the theory of international trade harper and brothers new york analytical objections to the ppc are revived

interim rank risk taking and performance in dynamic tournaments we empirically study the impact of interim rank on risk taking and performance using data on professionals competing in tournaments for large rewards as we observe both the intended action and the performance of each participant we can measure risk taking and performance separately we present two key findings first risk taking exhibits an inverted u relationship with interim rank revealing information on relative performance induces individuals trailing just behind the interim leaders to take greater risks second competitors systematically underperform when ranked closer to the top despite higher incentives to perform well disclosing information on relative ranking hinders interim leaders

increasing returns human capital and the kuznets curve abstract we present a simple model of human capital accumulation which generates the kuznets curve as an equilibrium outcome the central ingredient that helps generate the kuznets curve in the model is what we call short run increasing returns to scale in the learning technology the learning technology exhibits increasing returns to scale but only in the short run since one of the factors of production time is bounded above by the endowment we show that short run increasing returns to scale is necessary to obtain the kuznets curve but not sufficient

tournament rewards and risk taking this article considers a lazear rosen tournament model where agents can influence both the spread of their output distribution risk taking and its mean the unique equilibrium induces excessive risk taking and a low level of effort by modifying the tournament to give the highest prize to the agent with the most moderate output a low level of risk taking and high level of effort can be sustained as an equilibrium the first result can be useful to understand the relative performance evaluation puzzle of executive compensation and the second result can be useful to understand puzzling workplace norms promoting mediocrity

a model of growth and migration this paper contains a model with which the desirability of persistent urbanization can be examined there are two regions city and countryside joint restrictions on the technologies in each region and on preferences over the goods produced in each region are the driving force of migration in equilibrium there is persistent migration from the countryside to the city even though there are externalities in production the competitive equilibrium is pareto optimal summary in fre excerpt

keeping one step ahead of the joneses status the distribution of wealth and long run growth assuming that the utility of each agent depends on its relative wealth position in the society this chapter constructs an endogenous growth model it is shown that even if the subjective discount rates differ across agents there exists a unique balanced growth equilibrium in which each agent owns a positive share of the world wealth it is also shown that if the agents are identical then an increase in savings incentives always raises the long run growth rate but if they are heterogeneous then an increase in savings incentives may lower the long run growth rate

an investigation of the labor market earnings of panamanian males evaluating sources of inequality this paper presents empirical evidence on the determinants of labor market earnings and inequality for males in panama using newly available microdata we estimate earnings equations based on the measurement framework of mincer 1974 and compare them with those for other countries at various stages of economic development we present evidence on two aspects of inequality in less developed economies labor market segmentation and social stratification we present tests of the segmentation hypothesis including several of the dual labor market hypotheses and discuss their inherent ambiguity we also present evidence on the importance of family background for earnings determination and educational attainment

conspicuous consumption snobbism and conformism abstract we develop a model in which consumers purchase a conspicuous good in order to signal high income and thereby achieve greater social status in equilibrium the signalling value of conspicuous consumption depends in an identifiable way on the number of consumers and consumer behaviour is characterized by either snobbism or conformism the market demand curve for the conspicuous good may exhibit a positive slope if consumers are conformist we derive some unconventional policy implications concerning the taxation of luxuries and the voluntary provision of public goods

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

marriage as a rat race noisy premarital investments with assortative matching we study the efficiency of premarital investments when parents care about their child s marriage prospects in a large frictionless marriage market with nontransferable utility stochastic returns to investment ensure that equilibrium is unique we find that generically investments exceed the pareto efficient level unless the sexes are symmetric in all respects girls will invest more than boys if their quality shocks are less variable than shocks for boys or if they are the abundant sex the unique equilibrium in our continuum agent model is the limit of the equilibria of finite models as the number of agents tends to infinity

status the distribution of wealth private and social attitudes to risk this paper supposes an individual cares about his her own wealth not only directly but also via the relative standing that this wealth induces the implications for risk taking are investigated in particular such a model provides a natural explanation of the concave convex concave utility described by friedman and savage however there are a number of key differences between the present model and any model based on own wealth alone for example an equilibrium wealth distribution here may have a middle class further the status interaction involves an externality and an equilibrium wealth distribution may be pareto inefficient but also about the implied relative standing in the distribution of wealth has a long but checkered history an early exponent of such ideas was of course veblen 1899 it is indeed a notion which most economists reject albeit usually without explicit comment a notable and articulate exception however is frank 1985 for example see also the references frank cites on pp 33 34 it is however a notion with substantial intuitive appeal and it seems useful to ascertain its consequences before coming to a final judgement as to its merits the present paper is concerned with deriving the consequences of such valuation of status for risk taking what seems to be the sharpest possible model is adopted here this assumes that what is essentially ordinal rank in the wealth distribution enters von neumann morgenstern utility as an argument in addi tion to wealth itself thus higher wealth increases utility not only directly but also indirectly via higher status in the interests of both simplicity and drama it is typically assumed here that all individuals have identical utility functions which are concave in wealth but convex in status section 2 discusses how the model provides a natural explanation of the fundamental phenomenon addressed by friedman and savage 1948 that individuals may simultaneously purchase insurance and participate in lotteries although each individual here has a utility function which is concave in wealth itself utility can nevertheless be convex in wealth over some range when the indirect effect via status is included this effect is enhanced by the convexity of utility in status but will follow in any case if increasing wealth entails moving up in status much more rapidly than losing wealth entails moving down it is shown

social comparisons status and driving behavior abstract the establishment of desirable social norms is an integral part of a well functioning civil society while recent evidence has demonstrated that social comparison can affect behavior in a variety of contexts it is not clear what type of comparative social information is most effective using a large scale field experiment to study driving practices we sent text messages containing different types of social information to drivers in tsingtao china we find two types of social information to be particularly effective in reducing traffic violations the driving behavior of those similar to oneself and the driving behavior of those with high status cars our results indicate that the combination of descriptive norms with social status is a cost effective yet powerful intervention for establishing better driving behavior in emerging markets

getting ahead of the joneses when equality increases conspicuous consumption among bottom tier consumers it is widely believed that increasing the equality of material possessions or income in a social group should lead people at the bottom of the distribution to consume less and save more however this prediction and its causal mechanism have never been studied experimentally five studies show that greater equality increases the satisfaction of those in the lowest tier of the distribution because it reduces the possession gap between what they have and what others have however greater equality also increases the position gains derived from status enhancing consumption since it allows low tier consumers to get ahead of the higher proportion of consumers clustered in the middle tiers as a result greater equality reduces consumption when consumers focus on the narrower possession gap but it increases consumption when they focus on the greater position gains i e when consumption is conspicuous social competition goals are primed and the environment is competitive