The quest for status and R&D-based growth

Hof, Franz X.; Prettner, Klaus

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Hof, Franz X. ; Prettner, Klaus

The quest for status and R&D-based growth

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URN: urn:nbn:de:bsz:100-opus-12706
URL: http://opus.uni-hohenheim.de/volltexte/2016/1270/

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SWD-Schlagwörter:

Wirtschaftswachstum , Technischer Fortschritt

Freie Schlagwörter (Englisch):

status concerns , relative wealth , technological progress , long-run economic growth , social optimality

Institut:

Institut für Volkswirtschaftslehre

DDC-Sachgruppe:

Wirtschaft

Dokumentart:

ResearchPaper

Schriftenreihe:

Hohenheim discussion papers in business, economics and social sciences

Bandnummer:

2016,12

Sprache:

Englisch

Erstellungsjahr:

2016

Publikationsdatum:

15.09.2016

Lizenz:

Veröffentlichungsvertrag mit der Universitätsbibliothek Hohenheim

Kurzfassung auf Englisch:

We analyze the impact of status preferences on technological progress and long-run economic growth within an R&D-based framework. For this purpose, we extend the standard relative wealth approach by allowing the various assets held by households to differ with respect to their status relevance. Relative wealth preferences imply that the effective rate of return on saving in the form of a particular asset is the sum of its market rate of return and its status-related extra return. We show that the status relevance of shares issued by entrants to finance the purchase of new technologies is of crucial importance for long-run growth: First, an increase in the intensity of the quest for status raises the steady-state economic growth rate only if the status-related extra return of these shares is strictly positive. Second, for any given degree of status consciousness, the long-run economic growth rate depends positively on the relative status relevance of shares issued by entrants. Third, while the decentralized long-run economic growth rate is less than its socially optimal counterpart in the standard model, wealth externalities reduce this distortion.