Keeping up with the Joneses: who loses out?

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    Abstract

    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.
    Original languageEnglish
    Pages (from-to)400-403
    Number of pages10
    JournalEconomics Letters
    Volume125
    Issue number3
    Early online date31 Oct 2014
    DOIs
    Publication statusPublished - Dec 2014

    Keywords

    • Veblen Effects;
    • Consumer choice
    • Nash equilibrium
    • wages and well-being

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