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Status Effects and Negative Utility Growth

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Author Info
Cooper, Ben
Garcia-Penalosa, Cecilia
Funk, Peter

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Abstract

This paper explains the observed stagnation of "happiness" measures through a growth model in which agents care about conspicuous consumption. "Normal goods" confer direct utility, while "status goods" confer utility only at the expense of others. Firms can improve the quality of both goods through R&D. The Nash equilibrium of the consumer game results in the share of expenditure on status goods increasing with the number of times the status good has been improved. As the economy grows, resources for innovation are transferred entirely to status-good R&D. The resulting long-run rate of utility growth is negative.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 111 (2001)
Issue (Month): 473 (July)
Pages: 642-65
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Handle: RePEc:ecj:econjl:v:111:y:2001:i:473:p:642-65

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  1. David R Stead, . "Fixed Rent Contracts in English Agriculture, 1750-1850: A Conjecture," Discussion Papers 05/01, Department of Economics, University of York. [Downloadable!]
  2. Claudia Senik, 2005. "Ambition and jealousy. Income interactions in the "Old" Europe versus the "New" Europe and the United States," PSE Working Papers 2005-14, PSE (Ecole normale supérieure), revised Mar 2007. [Downloadable!]
    Other versions:
  3. Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  4. Ed Hopkins & Tatiana Kornienko, 2007. "Status, Affluence, and Inequality: Rank-Based Comparisons in Games of Status," Levine's Bibliography 122247000000001442, UCLA Department of Economics. [Downloadable!]
  5. Luuk Van Kempen, 2003. "Fooling the eye of the beholder: deceptive status signalling among the poor in developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(2), pages 157-177. [Downloadable!]
  6. Pérez Truglia, Ricardo Nicolás, 2007. "Can a rise in income inequality improve welfare?," MPRA Paper 4700, University Library of Munich, Germany, revised 22 Dec 2007. [Downloadable!]
  7. Armin Falk & Markus Knell, . "Choosing the Joneses On the Endogeneity of Reference Groups," IEW - Working Papers iewwp053, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  8. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  9. John Komlos & Peter Salamon, 2005. "The Poverty of Growth with Interdependent Utility Functions," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  10. Claudia Senik, 2004. "Relativizing relative income," DELTA Working Papers 2004-17, DELTA (Ecole normale supérieure). [Downloadable!]
  11. Cecilia García-Peñalosa & Jean-François Wen, 2008. "Redistribution and entrepreneurship with Schumpeterian growth," Journal of Economic Growth, Springer, vol. 13(1), pages 57-80, March. [Downloadable!] (restricted)
  12. John Beath & Felix FitzRoy, 2006. "Status, Hapiness and Relative Income," Discussion Paper Series, Department of Economics 0604, Department of Economics, University of St. Andrews. [Downloadable!]
  13. Baochun Peng, 2008. "Relative deprivation, wealth inequality and economic growth," Journal of Economics, Springer, vol. 94(3), pages 223-229, September. [Downloadable!] (restricted)
  14. Cecilia Garcia-Peñalosa & Jean-François Wen, 2004. "Redistribution and Occupational Choice in a Schumpeterian Growth Model," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  15. Cecilia García-Peñalosa & Stephen Turnovsky, 2008. "Consumption externalities: a representative consumer model when agents are heterogeneous," Economic Theory, Springer, vol. 37(3), pages 439-467, December. [Downloadable!] (restricted)
  16. John Beath & Felix FitzRoy, 2007. "Status, Happiness, and Relative Income," IZA Discussion Papers 2658, Institute for the Study of Labor (IZA). [Downloadable!]
  17. Claudia Senik, 2003. "What Can we Learn from Subjective Data ? The Case of Income and Well-Being," DELTA Working Papers 2003-06, DELTA (Ecole normale supérieure), revised Oct 2003. [Downloadable!]
  18. David G. Blanchflower & Andrew J. Oswald, 2004. "Money, Sex, and Happiness: An Empirical Study," NBER Working Papers 10499, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Maria Rosaria Carillo & Erasmo Papagni, 2006. "Social Rewards in Science and Economic Growth," Discussion Papers 10_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
    Other versions:
  20. Ennio Bilancini & Massimo D'Antoni, 2008. "Pensions and Intergenerational Risk-Sharing When Relative Consumption Matters," Department of Economics University of Siena 541, Department of Economics, University of Siena. [Downloadable!]
  21. Falk, Armin & Knell, Markus, 2004. "Choosing the Joneses: Endogenous Goals and Reference Standards," IZA Discussion Papers 1152, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  22. repec:att:wimass:1920322 is not listed on IDEAS
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