Social Status Preference And Economic Growth

This paper investigates the implications of status-seeking behavior for long-run and short-run economic growth in the two-sector human capital models. We simultaneously introduce two kinds of social status preference into the individual's utility function, that is, the status defined by his wealth level and the status defined by his ability level.We can show that the preference for ability is certain to be an engine of the economic growth both in long-run and in short-run. In contrast, preference for wealth is not necessarily associated with activities that stimulate economic growth, in fact, in most cases it encumber the economic development.