Document Type

Working Paper

Publication Date

7-29-2009

Working Paper Number

WP #08003, January 2008; Old working paper #12862

Abstract

We study a variant of the conventional keeping-up-with-the-Joneses setup in which heterogeneous-ability agents care both about consumption and leisure and receive an utility premium if their consumption exceeds that of the Joneses'. Unlike the conventional setup in which all agents are assumed to want to participate in the rat race of staying ahead of the Joneses, our formulation explicitly permits the option to drop out. Mean-preserving changes in the spread of the underlying ability distribution, via its effect on the economy-wide composition of rat-race participants and drop-outs, have important consequences for induced distributions of leisure and income, consequences that are unobtainable using conventional keeping-up preferences.

Publication Status

Published in Economic Theory, Vol. 45 no. 3 (2010): 469-496.

JEL Classification

J22, E2, I31

File Format

application/pdf

Length

41 pages

File Function

Originally pulished as WP #08003, January 2008; This version July 29, 2009.

Included in

Economics Commons

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