We investigate how social status concerns may affect voters’ preferences for redistribution. Social status is given by a voter’s relative standing in two dimensions: consumption and social class. By affecting the distribution of consumption levels, redistribution modifies the weights attached to the two dimensions. Thus, redistribution not only transfers resources from the rich to the poor, but it also amplifies or reduces the importance of social class differences. Social status concerns can simultaneously lead some members of the working class to oppose redistribution and some members of the socioeconomic elites to favor it. They also give rise to interclass coalitions of voters that, despite having different monetary interests, support the same tax rate. We characterize these coalitions and discuss the resulting political equilibrium.

We present a natural environment that sustains full cooperation in one-shot social dilemmas among a finite number of self-interested agents. Players sequentially decide whether to contribute to a public good. They do not know their position in the sequence, but observe the actions of some predecessors. Since agents realise that their own action may be observed, they have an incentive to contribute in order to induce potential successors to also do so. Full contribution can then emerge in equilibrium. The same environment leads to full cooperation in the prisoners' dilemma.

The author reviews recent studies that investigate how social status concerns influence individual preferences for redistribution and impact the design of optimal tax policies. He focuses on two aspects: the relevant dimension over which relative concerns are defined and the different formalizations of the notion of social status that the authors provide.(Published in Special Issue The economics of social status) JEL D31 D62 H21 H23