Status and poverty

Omer Moav, Zvika Neeman

Research output: Contribution to journalArticlepeer-review

Abstract

We present a model in which individuals' preferences are defined over their consumption, transfers to offspring, and social status associated with income. We show that a separating equilibrium exists where individuals' expenditure on conspicuous consumption is a signal for their unobserved income. In this equilibrium, poor families that climb up the social ladder by the accumulation of wealth engage in conspicuous consumption that prevents them from escaping poverty. Our model may explain why the poor make some choices that do not appear to help them escape poverty.

Original languageEnglish
Pages (from-to)413-420
Number of pages8
JournalJournal of the European Economic Association
Volume8
Issue number2-3
DOIs
StatePublished - 2010

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