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Social Status, Education, and Growth

Chaim Fershtman, Kevin M. Murphy and Yoram Weiss
Journal of Political Economy
Vol. 104, No. 1 (Feb., 1996), pp. 108-132
Stable URL: http://www.jstor.org/stable/2138961
Page Count: 25
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Social Status, Education, and Growth
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Abstract

This paper investigates the implications of social rewards on the allocation of talent in society and consequently on the process of economic growth. We consider two sources of heterogeneity among workers: nonwage income and innate ability. A greater emphasis on status may induce the "wrong" individuals, that is, those with low ability and high wealth, to acquire schooling, causing workers with high ability and low wealth to leave the growth-enhancing industries. This crowding-out effect, taken alone, discourages growth. Growth may be enhanced by a more egalitarian distribution of wealth, which reduces the demand for status.

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