Status jobs, human capital, and growth: the effects of heterogeneity

This paper develops a simple endogenous growth model of human capital accumulation with social status effects. These include status from job quality, as indicated by their relative level of education, as well as 'keeping up with the Joneses' in consumption. Symmetrically held, social aspirations increase growth, but possibly to a sub-optimally high level. Under heterogeneity, we show that growth and inequality are negatively related. We distinguish between 'average' and 'differential' status effects, and point out the difference in the effects on growth and equality between these two classes. Within the 'differential' effects class, any rise in 'gains from' and decrease in 'pains from the lack of' status from either consumption and/or job quality would decrease mean hours in education, growth, and increase inequality. Copyright 2009 , Oxford University Press.