IDEAS home Printed from https://ideas.repec.org/p/usi/wpaper/409.html
   My bibliography  Save this paper

Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right

Author

Listed:
  • Samuel Bowles
  • Yongjin Park

Abstract

We investigate the importance of Veblen effects on work hours, namely the manner in which a desire to emulate the consumption standards of the rich influences individuals’ allocation of time between labor and leisure. Our model of the choice of work hours captures Veblen effects by taking account of the influence of the consumption of the well-to-do on the marginal utility of consumption by the less well-off. The main result is that work hours are increasing in the degree of income inequality. We use data on work hours of manufacturing employees in ten countries over the period 1963-1998, along with three different measures of income inequality to explore this hypothesis. Using both OLS and country-fixed-effects estimates, we find that greater inequality predicts longer work hours. Its effects are large, and estimates are robust across a variety of specifications. Additional evidence suggests that while greater inequality may induce longer hours for conventional incentive reasons, this mechanism does not account for our results. We show that in the presence of Veblen effects, a social welfare optimum cannot be implemented by a flat tax on consumption but may be accomplished by more complicated (progressive) consumption taxes or by subsidizing the leisure of the rich.

Suggested Citation

  • Samuel Bowles & Yongjin Park, 2003. "Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right," Department of Economics University of Siena 409, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:409
    as

    Download full text from publisher

    File URL: http://repec.deps.unisi.it/quaderni/409.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, vol. 70(1), pages 157-183, October.
    2. René Böheim & Mark P. Taylor, 2004. "Actual and Preferred Working Hours," British Journal of Industrial Relations, London School of Economics, vol. 42(1), pages 149-166, March.
    3. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    4. Michael J. Boskin & Eytan Sheshinski, 1978. "Optimal Redistributive Taxation When Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(4), pages 589-601.
    5. Harold L. Cole & George J. Mailath & Andrew Postlewaite, 1995. "Incorporating concern for relative wealth into economic models," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 19(Sum), pages 12-21.
    6. Richard B. Freeman, 2002. "The Labour Market in the New Information Economy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 18(3), pages 288-305.
    7. Bruno S. Frey, 2018. "Economics of Happiness," SpringerBriefs in Economics, Springer, number 978-3-319-75807-7, October.
    8. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    9. Easterlin, Richard A., 1974. "Does Economic Growth Improve the Human Lot? Some Empirical Evidence," MPRA Paper 111773, University Library of Munich, Germany.
    10. Layard, Richard, 1980. "Human Satisfactions and Public Policy," Economic Journal, Royal Economic Society, vol. 90(363), pages 737-750, December.
    11. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
    12. Eric Alden Smith & Samuel Bowles & Herbert Gintis, 2000. "Costly Signaling and Cooperation," Working Papers 00-12-071, Santa Fe Institute.
    13. Sen, Amartya, 1983. "Poor, Relatively Speaking," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 153-169, July.
    14. Bell, Linda A. & Freeman, Richard B., 2001. "The incentive for working hard: explaining hours worked differences in the US and Germany," Labour Economics, Elsevier, vol. 8(2), pages 181-202, May.
    15. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
    16. Oswald, Andrew J., 1983. "Altruism, jealousy and the theory of optimal non-linear taxation," Journal of Public Economics, Elsevier, vol. 20(1), pages 77-87, February.
    17. H. Leibenstein, 1950. "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 64(2), pages 183-207.
    18. Linda Bell, 1998. "Differences in Work Hours and Hours Preferences by Race in the U.S," Review of Social Economy, Taylor & Francis Journals, vol. 56(4), pages 481-500.
    19. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-373, June.
    20. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    21. Landers, Renee M & Rebitzer, James B & Taylor, Lowell J, 1996. "Rat Race Redux: Adverse Selection in the Determination of Work Hours in Law Firms," American Economic Review, American Economic Association, vol. 86(3), pages 329-348, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Constantinos Alexiou & Adimulya Kartiyasa, 2020. "Does greater income inequality cause increased work hours? New evidence from high income economies," Bulletin of Economic Research, Wiley Blackwell, vol. 72(4), pages 380-392, October.
    2. Oh, Seung-Yun & Park, Yongjin & Bowles, Samuel, 2012. "Veblen effects, political representation, and the reduction in working time over the 20th century," Journal of Economic Behavior & Organization, Elsevier, vol. 83(2), pages 218-242.
    3. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
    4. Richard Ball & Kateryna Chernova, 2008. "Absolute Income, Relative Income, and Happiness," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 88(3), pages 497-529, September.
    5. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2012. "Social Decision Theory: Choosing within and between Groups," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(4), pages 1591-1636.
    6. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    7. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    8. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
    9. Justina A.V. Fischer & Benno Torgler, 2013. "Do Positional Concerns Destroy Social Capital: Evidence From 26 Countries," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1542-1565, April.
    10. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    11. Benno Torgler & Justina A.V. Fischer, 2006. "Does Envy Destroy Social Fundamentals? The Impact of Relative Income Position on Social Capital," Working Papers 2006.38, Fondazione Eni Enrico Mattei.
    12. 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.
    13. Frederick Van der Ploeg, 2004. "The Welfare State, Redistribution and the Economy, Reciprocal Altruism, Consumer Rivalry and Second Best," CESifo Working Paper Series 1234, CESifo.
    14. Michael D. Carr & Arjun Jayadev, 2015. "Relative Income and Indebtedness: Evidence from Panel Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(4), pages 759-772, December.
    15. Corazzini, Luca & Esposito, Lucio & Majorano, Francesca, 2012. "Reign in hell or serve in heaven? A cross-country journey into the relative vs absolute perceptions of wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 81(3), pages 715-730.
    16. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew J. & Qian, Jing, 2005. "Does Wage Rank Affect Employees' Wellbeing?," IZA Discussion Papers 1505, Institute of Labor Economics (IZA).
    17. Michael D. Carr & Arjun Jayadev, 2013. "Relative Income and Indebtedness: Evidence from Panel Data," Working Papers 2013_02, University of Massachusetts Boston, Economics Department.
    18. Armin Falk & Markus Knell, "undated". "Choosing the Joneses On the Endogeneity of Reference Groups," IEW - Working Papers 053, Institute for Empirical Research in Economics - University of Zurich.
    19. Alpizar, Francisco & Carlsson, Fredrik & Johansson-Stenman, Olof, 2005. "How much do we care about absolute versus relative income and consumption?," Journal of Economic Behavior & Organization, Elsevier, vol. 56(3), pages 405-421, March.
    20. Benno Torgler & Sascha L. Schmidt & Bruno S. Frey, 2006. "The Power of Positional Concerns: A Panel Analysis," CREMA Working Paper Series 2006-19, Center for Research in Economics, Management and the Arts (CREMA).

    More about this item

    Keywords

    Interdependent utility; relative income; emulation; Veblen effects; work hours;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usi:wpaper:409. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fabrizio Becatti (email available below). General contact details of provider: https://edirc.repec.org/data/desieit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.