Social Capital and the Status Externality

39 Pages Posted: 22 Feb 2018

See all articles by Jun-ichi Itaya

Jun-ichi Itaya

Hokkaido University - Division of Modern Economics and Management

Christopher Tsoukis

London Metropolitan University - Department of Economics, Finance and International Business (EFIB)

Date Written: January 17, 2018

Abstract

This paper investigates how the presence of social capital affects the externality arising from status-seeking preference as a parable for inefficient antagonistic behavior. It is assumed that the stock of social capital is accumulating through joint social interaction between rational individuals who are forward looking. Using a differential game, we show that although the presence of social capital mitigates the tendency of overconsumption over time, social capital ends up declining to zero. It is also shown that the benefits from social capital enhance the motivation of individuals to accumulate social capital thereby leading to deter overaccumulation and thus possibly improving social welfare.

Keywords: social capital, status externality, Markov perfect equilibrium, differential game

JEL Classification: O400, Q330

Suggested Citation

Itaya, Jun-ichi and Tsoukis, Chris, Social Capital and the Status Externality (January 17, 2018). CESifo Working Paper Series No. 6820. Available at SSRN: https://ssrn.com/abstract=3127344

Jun-ichi Itaya (Contact Author)

Hokkaido University - Division of Modern Economics and Management ( email )

Sapporo 060-0809
Japan

Chris Tsoukis

London Metropolitan University - Department of Economics, Finance and International Business (EFIB) ( email )

Economics Subject Group, LMBS
London EC2M 6SQ, EC2M 6SQ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
20
Abstract Views
147
PlumX Metrics