Social limits to redistribution and conspicuous norms

Abstract

In this article the author considers an economy in which individuals are matched into pairs and the desirability of an individual depends on her position on the distribution of wealth. He assumes that individuals show their relative standing by consuming a conspicuous good and he shows that there exist different social norms supporting different matching arrangements. In addition, individuals have to vote over a redistributive policy and the author shows that, despite the desirability of the full redistributive outcomes, under some economic conditions the medium class is able to match with the high class in exchange of a minimum level of redistribution of wealth which keeps the low class far from economic and social opportunities.

Social Status Concerns and the Political Economy of Publicly Provided Private Goods

“…7 Recently, the model of Corneo and Grüner (2000) has been extended by Ferrari (2018) who provides economic conditions such that medium income earners form a political coalition with the rich to support a policy that increases their own social distance to the poor. In our paper, the rich tend to lure middle class voters into the public sector.…”

Social status, preferences for redistribution and optimal taxation: a survey

“…For completeness,Corneo and Grüner (2002) find that also the two other forces, the 'homo oeconomicus effect' and the 'public values effect', have significant explanatory power. 4Ferrari (2018) extends the model byCorneo and Grüner (2000) by letting individuals signal their (ordinal) status through the consumption of a conspicuous good. The game features different equilibrium profiles of conspicuous consumption, which thus lead to different possible stratifications of the society in terms of redistributive preferences.www.economics-ejournal.org…”