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Envy, leisure, and restrictions on working hours

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  • Francisco Alvarez‐Cuadrado

Abstract

. We present a simple model of capital accumulation where agents care about their consumption relative to the consumption of other members of society, ‘envy,’ In this context we quantify the extent of the distortions and welfare costs associated with envy. Under conservative estimates of envy we find that the implied welfare losses are substantial. We explore the implications of alternative policy arrangements designed to minimize the effects of the consumption externality. Our results suggest that if the optimal tax policy is not politically feasible, restrictions on working hours provide an alternative tool to induce a market outcome that resembles the efficient allocation achieved under a benevolent central planner. JEL classification: D62, H21 On présente un modèle d'accumulation où les agents sont affectés par leur niveau de consommation relativement à celui des autres membres de la société– il y a ≪envie≫. On quantifie jusqu'à quel point il y a distorsions et pertes de bien‐être associées à l'envie. Des évaluations conservatrices montrent que les pertes de bien‐être sont substantielles. On explore ce que ces résultats impliquent pour la définition de politiques de rechange visant à minimiser les effets de cet effet externe de consommation. On suggère que si la politique fiscale optimale n'est pas politiquement acceptable, des restrictions sur les heures de travail pourraient être un instrument de rechange qui pourrait produire des résultats de marché qui ressemblent à l'allocation efficace qui découlerait des actions d'un planificateur central bienveillant.

Suggested Citation

  • Francisco Alvarez‐Cuadrado, 2007. "Envy, leisure, and restrictions on working hours," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(4), pages 1286-1310, November.
  • Handle: RePEc:wly:canjec:v:40:y:2007:i:4:p:1286-1310
    DOI: 10.1111/j.1365-2966.2007.00452.x
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    Cited by:

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    2. Fatma SAFI & Lobna Ben Hassen, 2021. "Subtractive versus Multiplicative Habits in Environmental Economics," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 72-90, March.
    3. Goerke, Laszlo & Hillesheim, Inga, 2013. "Relative consumption, working time, and trade unions," Labour Economics, Elsevier, vol. 24(C), pages 170-179.
    4. Yan, Eric & Feng, Qu & Ng, Yew-Kwang, 2021. "Do we need ramsey taxation? Our existing taxes are largely corrective," Economic Modelling, Elsevier, vol. 94(C), pages 526-538.
    5. Vinod Mishra & Russell Smyth, 2012. "Work Hours in Chinese Enterprises: Evidence From Matched Employer-Employee Data," Monash Economics Working Papers 10-12, Monash University, Department of Economics.
    6. Malakhov, Sergey, 2013. "Эффект Веблена, Предельная Полезность Денег И Денежная Иллюзия [Veblen effect, marginal utility of money, and money illusion]," MPRA Paper 51014, University Library of Munich, Germany.
    7. Chang, Juin-jen & Liu, Chia-ying & Wang, Wei-neng, 2018. "Conspicuous consumption and trade unionism," Journal of Macroeconomics, Elsevier, vol. 57(C), pages 350-366.
    8. Goerke, Laszlo, 2013. "Relative consumption and tax evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 52-65.
    9. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "A Permanent Income Version of the Relative Income Hypothesis," CESifo Working Paper Series 2361, CESifo.
    10. Goerke, Laszlo, 2013. "Profit sharing and relative consumption," Economics Letters, Elsevier, vol. 118(1), pages 167-169.
    11. Markus Knell, 2009. "The Work-and-Spend Cycle in a Globalized World," Economics Bulletin, AccessEcon, vol. 29(1), pages 491-498.
    12. Sanou, Issa, 2024. "Consumption externalities, elastic labor supply and wealth distribution," Economic Modelling, Elsevier, vol. 137(C).
    13. Simone Valente, 2009. "International status seeking, trade, and growth leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 554-589, May.
    14. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "Relative Consumption and Resource Extraction," CIRANO Working Papers 2008s-27, CIRANO.
    15. Alvarez-Cuadrado, Francisco & Van Long, Ngo, 2011. "Relative consumption and renewable resource extraction under alternative property-rights regimes," Resource and Energy Economics, Elsevier, vol. 33(4), pages 1028-1053.
    16. Kenneth J. Arrow & Partha S. Dasgupta, 2009. "Conspicuous Consumption, Inconspicuous Leisure," Economic Journal, Royal Economic Society, vol. 119(541), pages 497-516, November.
    17. Tobias Koenig & Andreas Wagener, 2010. "Tax Structure and Government Expenditures under Tax Equity Norms," CESifo Working Paper Series 3205, CESifo.
    18. Curatola, Giuliano & Dergunov, Ilya, 2023. "International capital markets with interdependent preferences: Theory and empirical evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 403-421.
    19. Tim Friehe & Mario Mechtel & Markus Pannenberg, 2014. "Positional Income Concerns: Prevalence and Relationship with Personality and Economic Preferences," IAAEU Discussion Papers 201411, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    20. Goerke, Laszlo & Pannenberg, Markus, 2013. "Keeping up with the Joneses: Income Comparisons and Labour Supply," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80033, Verein für Socialpolitik / German Economic Association.
    21. Sanou Issa, 2021. "Jealousy and Wealth Inequality: The Cases of Heterogeneous Preferences and Elastic Labor Supply," Working Papers hal-03408115, HAL.
    22. Koenig, Tobias & Wagener, Andreas, 2013. "Tax structure and government expenditures with tax equity concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 90(C), pages 137-153.
    23. Pascal Courty & Merwan Engineer, 2019. "A pure hedonic theory of utility and status: Unhappy but efficient invidious comparisons," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(4), pages 601-621, August.

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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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