This paper analyzes international status seeking in a two-country model of endogenous growth: utility of agents in developing countries is affected by con- sumption gaps with the average consumer in advanced economies. By distorting terms of trade, status seeking: (i) may compensate for...

This paper formalizes international status seeking in a two-country model of endogenous growth: utility of agents in developing countries is affected by consumption gaps with advanced economies. By distorting intertemporal choices, envy tends to revert growth differentials in favor of the...

In this paper we analyze theoretically and empirically the impact of an increase in income inequality on the current account balance. We develop a model with consumption externalities and heterogeneous agents which explains how an increase in income inequality can affect negatively or positively...

The economic analysis of global warming is dominated by models based on optimal growth theory. This approach can generate biases in the presence of positional goods and status effects. We show that by ignoring these direct consumption externalities, integrated assessment models overestimate the...

Considering a finance constrained economy, we discuss the stabilization role of variable labour and capital income taxes under a balanced-budget rule in the presence of consumption externalities of the keeping up with the Joneses type. We find that sufficiently procyclical labor and/or capital...