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Journal article
The fight-or-flight response to the Joneses and inequality
Journal of economic dynamics & control, v 101, pp 187-210
Apr 2019
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This paper studies the fight-or-flight ambivalence people show towards the success of the proverbial Joneses. If an agent cares about leisure and his consumption relative to a benchmark set by the Joneses, his preferences display the keeping-up-with-the-Joneses (KUJ) property if an increase in the benchmark urges him to substitute away from leisure into work, allowing him to finance more consumption; the opposite is labeled running-away-from-the-Joneses (RAJ). The long literature, thus far, finds a) if any agent’s behavior displays KUJ (or RAJ), everyone’s will, or b) if an agent displays KUJ (or RAJ) in one portion of the consumption space, so will he everywhere. In an otherwise-standard environment with endowment heterogeneity, we provide conditions under which different agents sharing the same underlying preferences may endogenously respond very differently to the Joneses: while some may choose to keep up, others, possibly their close neighbors, may choose to run away. These choices themselves shape the income distribution, which in turn, determine the identity and fate of the Joneses. The analysis is novel because (a) such fight-or-flight conflict does not arise in existing models of consumption externalities, and (b) it identifies an endogenous mechanism that may dampen or amplify market income inequality arising from innate heterogeneity.
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Details
- Title
- The fight-or-flight response to the Joneses and inequality
- Creators
- Richard C. Barnett - Drexel UniversityJoydeep Bhattacharya - Iowa State UniversityHelle Bunzel - Iowa State University
- Publication Details
- Journal of economic dynamics & control, v 101, pp 187-210
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000465060700010
- Scopus ID
- 2-s2.0-85062587934
- Other Identifier
- 991019168009304721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Economics