Social status, inequality, and redistribution

We explore implications of social status concerns for redistribution, income inequality, and growth in a political economy framework. Salience of such concerns leads to a propagation mechanism, whereby initial income inequality and reduced willingness to redistribute income reinforce each other, potentially giving rise to multiple steady states. An extension illustrates the possibility of a high redistribution cum low inequality steady state resulting in a higher steady-state income level. Some of the model features are shown to be consistent with empirical regularities as reflected in survey data on social status attitudes.