We study a three-type, two-market signaling model of social status in which status competition is segmented: poor and middle individuals interact in a low-status market, while middle and rich individuals interact in a high-status market. Because the middle type competes in both markets, changes that intensify poor–middle competition can relax status pressure at the top. We show that policies or transfers that raise poor incomes can increase rich welfare for a range of parameter values. We also show that narratives that stigmatize poverty can benefit the rich by reshaping beliefs and status incentives, at the expense of the middle class. Finally, segregation shields the rich from direct status competition with the poor and allows them to substitute away from conspicuous spending, so the rich may have incentives to promote segregation. The model yields predictions about elite distancing, support for targeted transfers to the very poor, and incentives to sustain poverty stigma.
Sanesi et al. (Tue,) studied this question.