There appears to be a growing recognition among economists and other social commentators that people attempt to enhance their relative position (which is commonly described as status) through consumption choices and other behaviour. It has been less common to consider whether attempts to enhance relative position impact on saving behaviour. This thesis makes a number of contributions relating to the impact of relative position on saving behaviour. In this thesis I: - consider why concern for relative position may impact on saving behaviour. I demonstrate, with a simple intertemporal model the surprising result that when people are concerned with relative position, income risk can lead to most people saving less and the rich saving more. - conduct an empirical study to test the importance of relative position on saving behaviour. I find a statistically and economically significant relationship between peer income and saving behaviour consistent with theories that people actively forgo saving to seek to enhance their relative position. I use the data to demonstrate that relative position can help to explain why prior research has consistently found that the rich have higher saving rates. - consider the policy implications of relative position to saving behaviour. I examine the policies, primarily corrective taxation, that have been advocated to address externalities of relative position in a static setting. I find that there are significant issues when these policies are considered in an intertemporal setting. I examine the policy of mandatory saving in addressing distortions caused by relative position and the possibility that concern for relative position improves the effectiveness of mandatory saving policy.
| Identifer | oai:union.ndltd.org:ADTP/215399 |
| Date | January 2006 |
| Creators | Tooth, Richard James, Economics, Australian School of Business, UNSW |
| Publisher | Awarded by:University of New South Wales. School of Economics |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | Copyright Richard James Tooth, http://unsworks.unsw.edu.au/copyright |
Page generated in 0.0021 seconds