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DO STATUS-SEEKING MOTIVES ENHANCE ECONOMIC GROWTH? A SMALL OPEN GROWTH MODEL

Published online by Cambridge University Press:  18 August 2016

Juin-Jen Chang ,
Wei-Neng Wang  and
Ying-An Chen
Juin-Jen Chang
Affiliation:
Institute of Economics, Academia Sinica
Wei-Neng Wang*
Affiliation:
Institute of Economics, Academia Sinica
Ying-An Chen
Affiliation:
Institute of Economics, Academia Sinica
*
Address correspondence to: Wei-Neng Wang, Institute of Economics, 128 Academic Road, Section 2, Taipei 115, Taiwan, Republic of China; e-mail: wei7656@gmail.com.
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Abstract

This paper explores the growth effects of both consumption- and wealth-induced social comparisons in a unified small open endogenous growth model. We analytically show that in an open economy not only do these two distinct status-seeking motives have very different growth effects, but these growth effects are also quite different from the conventional wisdom based on a closed economy. Status-seeking behavior need not favor economic growth. The asset portfolios of households and the imperfection of the international asset market both play an important role and jointly govern the growth effects of social status seeking. We also perform a quantitative experiment, showing that our analytical findings are robust and empirically plausible. Our analysis provides novel implications for social comparisons and new insights into the literature.

Keywords

Social Status SeekingEndogenous GrowthOpen Economy
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Issue 2 , March 2018 , pp. 199 - 224
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

We thank Ping Wang, Ching-Chong Lai, Been-Lon Chen, Jhy-Yuan Shieh, the editor of this journal, and two anonymous referees for their helpful suggestions and insightful comments on an earlier version of this paper, whose inputs lead to a much improved paper. Financial support from the Ministry of Science and Technology, Taiwan, is gratefully acknowledged. Any remaining errors are of course our own responsibility.

References

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