Publication Date

November 2006

Publication Details

Levy, A, Sincere Social Capital with Material Status Sensitivity: Index and an Inverted U-Shaped Utility-Wealth Theory, Working Paper 06-27, Department of Economics, University of Wollongong, 2006.


This paper explores a possible effect of social capital on the relationship between utility and wealth. Material status sensitivity is considered in constructing the individual social-capital index. The incorporation of the index into the individual’s utility function leads to the proposition that if utility is directly increased by wealth but indirectly reduced by diminishing intensity and quality of sincere social interaction as the material-status-gape widens, there exists an inverted U-shaped relationship between utility and wealth. People located in the lower and upper tails of the wealth distribution are less content and hence more vulnerable to depression.