Working Paper: CEPR ID: DP15665
Authors: Dennis J. Snower; Steven Bosworth
Abstract: This paper models the welfare consequences of social fragmentation arising from technological advance. We start from the premise that technological progress falls primarily on market-traded commodities rather than prosocial relationships, since the latter intrinsically require the expenditure of time and thus are less amenable to productivity increases. Since prosocial relationships require individuals to identify with others in their social group whereas marketable commodities are commonly the objects of social status comparisons, a tradeoff arises between in-group affliation and inter-group status comparisons. People consequently narrow the bounds of their social groups, reducing their prosocial relationships and extending their status-seeking activities. As prosocial relationships generate positive externalities whereas status-seeking activities generate negative preference externalities, technological advance may lead to a particular type of "decoupling" of social welfare from material prosperity. Once the share of status goods in total production exceeds a crucial threshold, technological advance is shown to be welfare-reducing.
Keywords: Conspicuous Consumption; Bowling Alone; Decoupling; Social Fragmentation; Growth
JEL Codes: D63; D69; D71; E71; I39; O33; Z10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Productivity growth (O49) | Social fragmentation (F12) |
| Productivity growth (O49) | Market-traded commodities (G13) |
| Market-traded commodities (G13) | Prosocial relationships (D64) |
| Productivity growth (O49) | Status-seeking behaviors (D91) |
| Status-seeking behaviors (D91) | Social group size (C92) |
| Social group size (C92) | Social welfare (I38) |
| Productivity growth (O49) | Negative preference externalities (D62) |
| Productivity growth (O49) | Competitive activities (L13) |
| Status goods in total production (L60) | Welfare reduction (I38) |