On the Importance of Social Status in Labour Markets
Fri, 30 Sep 2016 14:49:00 BST
Quantitative Analysis of Business, Economics and Finance (QABEF) Research Group Seminar
Wed, 5 Oct 2016, 13:15, Room BSG/20
Speaker: Dr Pawel Gola - University of Cambridge
All staff and students welcome
On the Importance of Social Status in Labour Markets
In this paper, I investigate the extent to which the taste for social status affects labour markets, using a Roy-like model of occupational sorting. First, I show that both occupational prestige (i.e. the status of the profession as a whole) and local status (i.e. the status of an individual within her profession) have, on their own, a very limited impact on sorting. However, the impact of their interaction is arbitrarily strong, provided that the taste for status is sufficiently high. High income taxes turn out to have exactly the same impact on sorting as high taste for status; therefore, the impact of social status can be arbitriatily high even if agents have a weak taste for it, provided that taxes are high enough. Finally, I explore the possibility of exploiting social status concerns a) by firms, to increase profits and b) by policymakers, to improve sorting efficiency.
