ABSTRACT We explore implications of social status concerns for redistribution, income inequality, and growth in a political economy framework. Salience of such concerns leads to a propagation mechanism, whereby initial income inequality and reduced willingness to redistribute income reinforce each other, potentially giving rise to multiple steady states. An extension illustrates the possibility of a high redistribution cum low inequality steady state resulting in a higher steady‐state income level. Some of the model features are shown to be consistent with empirical regularities as reflected in survey data on social status attitudes.
Gradstein et al. (Wed,) studied this question.