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Faculty of Economics

Alastair Langtry, a University of Cambridge student at the Faculty of Economics, has been awarded the 2022 EEA Young Economist Award, for his paper “Keeping up with ‘The Joneses’: reference dependent choice with social comparisons”.

 

Alastair Langtry

The EEA bestows the Young Economist Award to the authors no more than 3 years past a PhD defence of outstanding papers presented during contributed sessions of the EEA annual congress.

On winning the award Alastair said "I'm delighted to have received this prize. It's great that the EEA has chosen to recognise my research this way."

The paper looks at the way the most skilled workers have been increasingly sorting into the most productive cities and firms in recent decades, literally pulling away from their less successful peers. Such heightened sorting has naturally caused greater inequality across workers, firms, and places. But what has caused worker sorting to increase? The paper highlights and models theoretically a novel mechanism rooted in social psychology.

The paper presents insights and derives their implications in a model of reference-dependent choice whose reference point is determined by social comparisons within an endogenously chosen social network. The equilibrium features a harmful rat race: everyone exerts wasteful effort to impress others, in turn raising their incentive to do the same. Stronger social comparisons outside the workplace - whether over time or across individuals - imply stronger endogenous sorting and thus higher income and greater income segregation, but not necessarily higher welfare.

The Award has been supported by Unicredit & Universities since 2016 and is given to three best papers presented by young economists.

Further details are available at https://www.eeassoc.org/awards/young-economist-award

 

Fathers and Children Playing Near Their Homes

 

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