Occupational Choice and the Spirit of Capitalism

IZA Discussion Paper No. 2949

University of Zurich Working Paper No. 326

56 Pages Posted: 28 Jun 2007

See all articles by Matthias Doepke

Matthias Doepke

Northwestern University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Fabrizio Zilibotti

University of Zurich; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2007

Abstract

The British Industrial Revolution triggered a reversal in the social order of society whereby the landed elite was replaced by industrial capitalists rising from the middle classes as the economically dominant group. Many observers have linked this transformation to the contrast in values between a hard-working and frugal middle class and an upper class imbued with disdain for work. We propose an economic theory of preference formation where both the divergence of attitudes across social classes and the ensuing reversal of economic fortunes are equilibrium outcomes. In our theory, parents shape their children's preferences in response to economic incentives. If financial markets are imperfect, this results in the stratification of society along occupational lines. Middle-class families in occupations that require effort, skill, and experience develop patience and work ethic, whereas upper-class families relying on rental income cultivate a refined taste for leisure. These class-specific attitudes, which are rooted in the nature of pre-industrial professions, become key determinants of success once industrialization transforms the economic landscape.

Keywords: Aristocracy, endogenous preferences, entrepreneurship, finance, growth and income distribution, financial development, financial market imperfections, industrial revolution, middle class, patience, portfolio choice, savings, spirit of capitalism, work ethic

JEL Classification: D31, D91, G00, G11, N23

Suggested Citation

Doepke, Matthias and Zilibotti, Fabrizio, Occupational Choice and the Spirit of Capitalism (July 2007). IZA Discussion Paper No. 2949; University of Zurich Working Paper No. 326. Available at SSRN: https://ssrn.com/abstract=996390 or http://dx.doi.org/10.2139/ssrn.996390

Matthias Doepke (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Fabrizio Zilibotti

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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