Social Status, Education, and Growth
Tel Aviv University - Eitan Berglas School of Economics; Tinbergen Institute
Kevin M. Murphy
University of Chicago; National Bureau of Economic Research (NBER)
Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)
JOURNAL OF POLITICAL ECONOMY, 104, February 1996
This paper investigates the implications of social rewards on the allocation of talent in society and consequently on the process of economic growth. We consider two sources of heterogeneity among workers: nonwage income and innate ability. A greater emphasis on status may induce the "wrong" individuals, that is, those with low ability and high wealth, to acquire schooling, causing workers with high ability and low wealth to leave the growth-enhancing industries. This crowding-out effect, taken alone, discourages growth. Growth may be enhanced by a more egalitarian distribution of wealth, which reduces the demand for status.
JEL Classification: J24, J62, O15Accepted Paper Series
Date posted: June 27, 1998
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