Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right?
Author(s)
Bowles, Samuel; Park, Yongjin
Abstract
Authors investigate the manner in which a desire to emulate the rich influences individuals’ allocation of time between labor and leisure, greater inequality inducing longer work hours as a result. Data on work hours in ten countries over the period 1963-98 show that greater inequality is indeed associated longer work hours. These “Veblen effects” are large and the estimates are robust using country fixed effects and other specifications. Because consumption inequality is a public bad, a social welfare optimum cannot be implemented by a flat tax on consumption but may be accomplished by more complicated (progressive) consumption taxes.
