The Distributional Effects of Peer and Aspirational Pressure

75 Pages Posted: 14 Oct 2019

See all articles by Konstantinos Angelopoulos

Konstantinos Angelopoulos

University of Glasgow

Spyridon Lazarakis

University of Glasgow

Jim Malley

University of Glasgow - Department of Economics

Date Written: 2019

Abstract

We develop a theoretical framework where the cross-sectional distributions of hours, earnings, wealth and consumption are determined jointly with a set of expenditure targets defining peer and aspirational pressure for members of different social classes. We show existence of a stationary socio-economic equilibrium, under idiosyncratic stochastic productivity and socio-economic class participation. We calibrate a model belonging to this framework using British data and find that it captures the main patterns of inequality, between and within the social groupings. We find that the effects of peer pressure on within-group inequality differ between groups. We also find that wealth and consumption inequality increase within groups who aspire to match social targets from a higher class, despite a reduction in within-group inequality in hours and earnings.

Keywords: inequality, incomplete markets, peer pressure, aspirations

JEL Classification: E210, E250, D010, D310

Suggested Citation

Angelopoulos, Konstantinos and Lazarakis, Spyridon and Malley, Jim, The Distributional Effects of Peer and Aspirational Pressure (2019). CESifo Working Paper No. 7838, Available at SSRN: https://ssrn.com/abstract=3467971 or http://dx.doi.org/10.2139/ssrn.3467971

Konstantinos Angelopoulos (Contact Author)

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Spyridon Lazarakis

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Jim Malley

University of Glasgow - Department of Economics ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom
+44 141 330 4617 (Phone)
+44 141 330 4940 (Fax)

HOME PAGE: http://www.gla.ac.uk/economics/malley/

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