Status jobs, human capital, and growth: the effects of heterogeneity

This paper develops a simple endogenous growth model of human capital accumula-tion with social status effects. These include status from job quality, as indicated by their relative level of education, as well as ‘keeping up with the Joneses ’ in consump-tion. Symmetrically held, social aspirations increase growth, but possibly to a sub-optimally high level. Under heterogeneity, we show that growth and inequality are negatively related. We distinguish between ‘average ’ and ‘differential ’ status effects, and point out the difference in the effects on growth and equality between these two classes. Within the ‘differential ’ effects class, any rise in ‘gains from ’ and decrease in ‘pains from the lack of ’ status from either consumption and/or job quality would decrease mean hours in education, growth, and increase inequality