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Abstract

This paper develops a simple endogenous growth model of human capital accumulation with social status effects. These include status from job quality, as indicated by their relative level of education, as well as "keeping up with the Joneses in consumption" effects. We find that, symmetrically held, social aspirations increase growth, but possibly to a sub-optimally high level. Under heterogeneity, status considerations reduce growth and increase inequality if "gains from status" or "pains from loss of status" apply in both jobs and consumption; else the effects are the opposite. Thus, growth and equality are positively related.

JEL classification: O31, O41.

Keywords: education, status jobs, keeping up with the Joneses, growth, inequality.

November 2006

* Corresponding authors:
+Address: School of Economics, The University of Chicago-UTCC Research Center, University of the Thai Chamber of Commerce, 126/1 Vibhavadee-Rangsit Road, Dindaeng, Bangkok, 10400, Thailand.
E-mail: frederic.tournemaine@uc-utcc.org
‡Address: Economics Subject Group, London Metropolitan Business School, 84 Moorgate, London EC2M 6SQ, UK. Email: c.tsoukis@londonmet.ac.uk