PURSUIT OF RELATIVE UTILITY AND DIVISION-OF-LABOR

This paper investigates the implications of pursuit of relative utilit y for the equilibrium level of division of labor and trade dependence. Jianguo Wang's (''Pursuit of Relative Economic Standing,'' Ph.D. diss ertation, Department of Economics, Monash University, 1993) approach t o 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, 1-2:19 9-222, 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 ut ility has positive productivity implications and positive effects on t he development of the division of labor if it narrows the differential between preferences for different goods or if it reduces the desire f or a variety of a person's productive activities. That is to say, the consumption of relative position may or may not generate positive effe cts, depending on specific conditions. (C) 1996 Academic Press, Inc.