Non-monotonic welfare dynamics in a growing economy

► The evolution of social welfare in the presence of status-seeking behaviour. ► There is an endogenously derived threshold level of resources that determines whether status motives are active or not. ► Below this threshold, status considerations are not active: as income grows, more consumption supports higher welfare. ► Above the threshold, status motives are activated: consumption cannot contribute to higher welfare; welfare declines because working effort increases as the economy grows. ► The dynamics of welfare are inverse-U-shaped.