Aspirations and Inequality

Résumé

This paper develops a theory in which society-wide economic outcomes shape individual aspirations, which affect the investment incentives of individuals. Through its impact on investments, individual aspirations in turn affect ambient social outcomes. We explore this two-way link in setting in which aspirations and income (and the distribution of income) evolve jointly. In particular, we explore the relationship between aspirations, growth and widening inequality. (no paper)