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Well-being and Affluence in the Presence of a Veblen Good

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  • B.Curtis Eaton
  • Mukesh Eswaran

Abstract

The happiness literature has established that, in the developed countries, increasing affluence has not increased well-being in recent decades. We seek an explanation for this in terms of conspicuous consumption, a phenomenon originally identified by Veblen. We develop some simple general equilibrium models that incorporate a Veblen good, among others. In all of our models, as productivity increases, the Veblen good eventually dominates the economy in the sense that, by reducing leisure, more than all the added productivity is dissipated in the production of this good. Also, in the presence of a Veblen good, productivity increases destroy social capital. Copyright � The Author(s). Journal compilation � Royal Economic Society 2009.

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Bibliographic Info

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

Volume (Year): 119 (2009)
Issue (Month): 539 (07)
Pages: 1088-1104

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Handle: RePEc:ecj:econjl:v:119:y:2009:i:539:p:1088-1104

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Cited by:
  1. Michael D. Carr & Arjun Jayadev, 2013. "Relative Income and Indebtedness: Evidence from Panel Data," Working Papers 2013_02, University of Massachusetts Boston, Economics Department.
  2. Mukesh Eswaran & Bharat Ramaswami & Wilima Wadhwa, 2013. "Status, Caste, and the Time Allocation of Women in Rural India," Economic Development and Cultural Change, University of Chicago Press, vol. 61(2), pages 311 - 333.
  3. Varvarigos, Dimitrios, 2011. "Non-monotonic welfare dynamics in a growing economy," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 303-312, June.
  4. repec:clg:wpaper:2011-11 is not listed on IDEAS
  5. Eaton, B. Curtis & Matheson, Jesse A., 2013. "Resource allocation, affluence and deadweight loss when relative consumption matters," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 159-178.

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