Giacomo Corneo

Individual preferences for political redistribution

What drives peoples support of governmental reduction of income inequality? We employ data from a large international survey in order to evaluate the explanatory power of three competing forces, referred to as the ‘homo oeconomicus effect’, the ‘public values effect’, and the ‘social rivalry effect’. The empirical analysis reveals that at the aggregate level all three effects play a significant role in shaping individual preferences for political redistribution. Attitudes of citizens in formerly socialist countries turn out to differ from those of western citizens in a systematic way.

Conspicuous consumption, snobbism and conformism

Abstract We develop a model in which consumers purchase a conspicuous good in order to signal high income and thereby achieve greater social status. In equilibrium, the signalling value of conspicuous consumption depends, in an identifiable way, on the number of consumers, and consumer behaviour is characterized by either snobbism or conformism. The market demand curve for the conspicuous good may exhibit a positive slope if consumers are conformist. We derive some unconventional policy implications concerning the taxation of luxuries and the voluntary provision of public goods.

On relative wealth effects and the optimality of growth

Abstract We present a model of endogenous growth in which a desire for social status lead individuals to care about their relative wealth. The growth rate of the economy is socially optimal if the status motive is sufficiently important, but the presence of status seeking may also lead to excessive growth.

Status, the Distribution of Wealth, and Growth

We analyze a simple model of endogenous growth in which individuals care about both consumption and their rank in the distribution of wealth. We show that the steady-growth rate of the economy increases with both the strength of the status-seeking motive and the initial equality of the wealth distribution. Contrary to the basic model of endogenous growth, the equilibrium growth rate is not necessarily smaller than in the social optimum, and we identify the circumstances under which the two coincide. Copyright 2001 by The editors of the Scandinavian Journal of Economics.

From Bottom To Top: The Entire Income Distribution In Germany, 1992-2003

We analyze the distribution of market income in Germany in the period 1992 to 2003 on the basis of an integrated dataset that encompasses the whole spectrum of the population, from the very poor to the very rich. We find a modest increase of the Gini coefficient, a substantial drop of median income and a remarkable growth of the income share accruing to the economic elite, which we define as the richest 0.001 percent of persons in the population. While the elite mainly obtains its income from business and capital, the income share that it receives in the form of wage income has been increasing. We also show that the dramatic decline of market income in the bottom half of the distribution is very much mitigated by income transfers within private households and by governmental redistribution.

Social organization, status, and savings behavior

Abstract We develop a model of status seeking in the presence of incomplete information and derive its implications for aggregate savings. Status seeking endogenously takes the form of conspicuous consumption. Its impact on savings depends on the scheduling of the contests for status over the life cycle. If individuals engage in conspicuous consumption when old, aggregate savings are increased. We also study the role of social segmentation. While social segmentation reduces the inequality across status seekers and fuels social rivalry under complete information, we show that under incomplete information, social segmentation weakens the incentive to strive for greater status.

Work and television

Nowadays, people in OECD countries spend about as much time watching television as earning a living. In this Paper I report a puzzling fact about those time uses: television viewing and work hours are positively correlated across countries. A simple model based on complementarities in the organization of free time is then developed that explains such a pattern as resulting from multiple equilibria. All equilibria can be inversely Pareto-ranked by their amount of television viewing. Arguments are offered to explain why some countries may have settled in a Pareto-inferior equilibrium.

Public Pensions, Unemployment Insurance, And Growth

We develop an overlapping-generations model that highlights the interaction between an unfunded pension program and an unemployment insurance program in the presence of a labor market with union wage-setting. Both programs are financed by earmarked proportional wage taxes levied on firms and their employees. The equilibrium path entails endogenous growth and involuntary unemployment. The presence of spillovers between pension programs and unemployment insurance programs has striking implications for growth policy, efficiency issues, and the transition to a fully-funded pension system.

Snobs, bandwagons, and the origin of social customs in consumer behavior

Abstract We show how social norms may be endogenized in the context of Akerlofs theory of social custom. We argue that social norms may be consciously created by agents through an investment process. This idea is illustrated in a formal model of consumption norms. Socially inefficient consumption norms, giving rise to bandwagon and snob effects, are generated by producers that maximize their intertemporal profit. We characterize the equilibrium path of consumption norms and show that norms may be created only if producers have enough market power.

Social custom, management opposition, and trade union membership

Abstract This paper investigates the determinants of voluntary unionization in the labor market in a discrete-time version of the social custom model. Employer behavior in form of management opposition to union membership is explicitly taken into account. Conditions for the existence of unions in the long run are determined. It is shown that increasing the surplus per worker or the union bargaining power may have a negative impact on union density via more management opposition. Different incentives for management opposition can explain the greater success of unions in centralized bargaining systems.