On limiting the market for status signals
TL;DR: In this paper, the impacts of tax policy and benefits on the signalling equilibrium are considered, and the benefits of a Pareto-improving tax policy are discussed. But the authors do not consider the impact of tax on the signaling equilibrium.
About: This article is published in Journal of Public Economics.The article was published on 1994-01-01 and is currently open access. It has received 265 citations till now. The article focuses on the topics: Tax policy & Inefficiency.
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TL;DR: In this paper, the authors examined the long-term effects of birth cohort size on life outcomes using administrative data from Singapore and found that Chinese Dragons earn lower incomes and are less likely to gain admission to national universities.
Abstract: This paper examines the long-term effects of birth cohort size on life outcomes. Using administrative data from Singapore, we study the outcomes of large birth cohorts created by the Chinese superstitious practice of zodiac birth timing, where parents prefer to give birth in the year of the Dragon. This practice is followed exclusively by the Chinese majority, with no similar patterns detected among non-Chinese minorities, allowing us to differentiate cohort size effects from confounding year-of-birth effects. Despite government efforts to increase public educational resources for these cohorts, Chinese Dragons earn lower incomes and are less likely to gain admission to national universities. There is also evidence of negative externalities on non-practising populations who happen to enter the labour market at the same time as Chinese Dragons. Our analysis suggests that the adverse life outcomes are not due to selection, but rather reflect the aggregate resource implications of birth cohort size.Supplementary material is available for this article at: https://doi.org/10.1080/00324728.2020.1864458.
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TL;DR: In this article, the authors investigate the determinants of household conspicuous consumption on a wedding ceremony in Adi-Keih town, Eritrea, based on household survey data, and find that on the average, households spend more than twice of their annual income on the wedding ceremony.
Abstract: The level of household consumption expenditure indicates and is critical for enhancing the level of economic development as well as the wellbeing and wealth of societies. Conspicuous consumption, one component of the household consumption expenditure, includes the practice of purchasing goods or services for public display of wealth or status-seeking rather than covering basic needs and is common practice in developed and developing economies. One form of conspicuous consumption, households engaged in, is the extravagant spending on wedding celebrations, which have grown prohibitively expensive over time. The study, based on an OLS model, tries to investigate the determinants of household conspicuous consumption on a wedding ceremony in Adi-Keih town, Eritrea. The result of the study, based on household survey data, shows that on the average, households spend more than twice of their annual income on the wedding ceremony. Moreover, it reports that age, religion and level of education of the head of household, the total yearly income of the household, and financial support from abroad have significant effects on the level of conspicuous consumption on wedding ceremony. Based on these, policies on how to minimize the disproportionately large amount of spending that is diverted to signalling status are recommended.
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01 Jan 2002
TL;DR: This chapter begins by reviewing the framework for the study of consumption through nonwork activities in its application to status through consumption.
Abstract: In this chapter, I review the conceptual framework and empirical results of the preceding chapters and discuss directions for the subsequent study of status through consumption. I begin by reviewing the framework for the study of consumption through nonwork activities in its application to status through consumption.
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TL;DR: In this paper, the authors model the negative self-characterizations of welfare recipients as a form of social stigma, and use a utility maximization model to predict the impact of welfare programs on the low-income population.
Abstract: Perhaps the most basic assumption of the economic theory of consumer demand is that "more is better than less." Virtually all of the major propositions of consumer theory can, in a certain sense, be derived from the assumption that "goods are good." Interestingly, however, this tenet seems to be violated by the behavior of many individuals in the low-income population, for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls. For example, it has been estimated that in 1970, only about 69 percent of the families eligible for AFDC (Aid to Families with Dependent Children) participated in the program (see Richard Michel, 1980). The corresponding percentage for AFDC-U, the program for which families with an unemployed male are eligible, was only 43 percent and the participation rate in the Food Stamp Program was only 38 percent (see Maurice McDonald, 1977). This phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets. Consequently, most investigators ignore the problem when studying the effects of welfare programs on behavior. In this paper, this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma -that is, from disutility arising from participation in a welfare program per se.1 The existence of stigma has been amply documented in the sociological literature (Patrick Horan and Patricia Austin, 1974; Lee Rainwater, 1979), where interviews of recipients have often uncovered feelings of lack of self-respect and " negative self-characterizations" from participation in welfare. Nevertheless, this phenomenon has not been modeled, and many questions consequently remain. When is the disutility of participation strong enough to prevent participation? Shouldn't we expect individuals to weigh the disutility of participation against the potential benefit in their decisions? What is the elasticity of participation with respect to the potential benefit? Also, in a slightly different vein, how are the work disincentives of welfare affected by stigma? These questions have been given scant attention by economists, yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population. Here these questions are addressed by modeling nonparticipation as a utility-maximizing decision. The model is developed and estimated for the AFDC program.2 The model posits an individual utility function containing not just disposable income, but
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TL;DR: In this paper, the authors examine a variety of empirical evidence that relates to this proposition about the firm's internal wage structure and conclude that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products.
Abstract: Status is, like Coase's social costs, a reciprocal phenomenon. Given that one person's gain in status can occur only at the expense of a loss in status for others, and that workers are free to choose their coworkers, it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products.' The purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm's internal wage structure. The paper is organized as follows. Section I briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers. Section II then confronts the predictions of Section I by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed. Section II also examines the relationship between wages and productivity for a sample of university professors, an occupation in which individual productivity differences are, for a variety of obvious reasons, relatively more difficult to measure. All of the evidence examined is consistent with the hypothesis that, within firms, wage rates vary substantially less than do individual productivity values. Section III discusses additional observations and evidence that bear on this same hypothesis. It suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform. Section IV concludes by considering the claim that egalitarian internal wage structures arise because of "equity considerations." It argues that the concept of equity appears very closely linked to the concept of status, and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions.
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