Does a rise in income inequality induce people to work harder to stay in the rat race (“keep up with the Joneses”) or to simply drop out? We investigate this issue in a simple new framework in which heterogeneous ability agents get extra utility if their consumption keeps up with the...

Until 1989 local government in Great Britain was financed from two major sources: central government grants, and the local property tax, known as the rates. The rates were levied on most types of property, the basis for taxation being the notional rental value of the property. Although this...