Pursuit of relative utility and division of labor

This paper investigates the implications of pursuit of relative utility for the equilibrium level of division of labor and trade dependence. Jianguo Wang's (''Pursuit of Relative Economic Standing,'' Ph.D. dissertation, Department of Economics, Monash University, 1993) approach to modeling pursuit of relative economic standing is applied to Xiaokai Yang's framework with consumer-producers, economies of specialization, and transaction costs (Yang, Xiaokai, J. Develop. Econom. 34, 1-2:199-222, Nov. 1990) in order to investigate the relationship between the pursuit of relative utility, transaction efficiency, and the level of division of labor. It is found that a stronger desire for relative utility has positive productivity implications and positive effects on the development of the division of labor if it narrows the differential between preferences for different goods or if it reduces the desire for a variety of a person's productive activities. That is to say, the consumption of relative position may or may not generate positive effects, depending on specific conditions. (C) 1996 Academic Press, Inc.