Keeping up with the Joneses : who loses out?
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This paper investigates how well-being varies with individual wage rates when individuals care about relative consumption and so there are Veblen effects – Keeping up with the Joneses – leading individuals to over-work. In the case where individuals compare themselves with their peers – those with the same wage-rate - it is shown that Keeping up with the Joneses leads some individuals to work who otherwise would have chosen not to. Moreover for these individuals well-being is a decreasing function of the wage rate - contrary to standard theory. So those who are worst-off in society are no longer those on the lowest wage.
Ulph , D T 2014 , ' Keeping up with the Joneses : who loses out? ' Economics Letters , vol 125 , no. 3 , pp. 400-403 . DOI: 10.1016/j.econlet.2014.10.029
©2014 The Author. Published by Elsevier B.V. This is an open access article under the CCBY license (http://creativecommons.org/licenses/by/3.0/).
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