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Conspicuous Consumption, Inconspicuous Leisure

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  • KennethJ. Arrow
  • ParthaS. Dasgupta

Abstract

It is commonly argued that because relative consumption appears to matter to people, they must be involved in a 'rat race': people work harder and consume more than they would have were optimum public policies in place. But although consuming more today would improve one's relative consumption now, it would worsen one's relative consumption in the future. In this article we identify the structure of felicity functions for which the two effects offset each other exactly. The finding goes some way toward explaining why, while household surveys suggest that relative consumption matters, the consumption behaviour of households has not pointed unambiguously to the presence of relative consumption effects. 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): 541 (November)
Pages: F497-F516

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Handle: RePEc:ecj:econjl:v:119:y:2009:i:541:p:f497-f516

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Cited by:
  1. Aronsson, Thomas & Johansson-Stenman, Olof, 2013. "Publicly Provided Private Goods and Optimal Taxation when Consumers Have Positional Preferences," Working Papers in Economics 558, University of Gothenburg, Department of Economics.
  2. Jacopo Baggio & Elissaios Papyrakis, 2014. "Agent-Based Simulations of Subjective Well-Being," Social Indicators Research, Springer, vol. 115(2), pages 623-635, January.
  3. Winkelmann, Rainer, 2012. "Conspicuous consumption and satisfaction," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 183-191.
  4. Pfaff, Tobias & Hirata, Johannes, 2013. "Testing the Easterlin hypothesis with panel data: The dynamic relationship between life satisfaction and economic growth in Germany and in the UK," CIW Discussion Papers 4/2013, University of Münster, Center for Interdisciplinary Economics (CIW).
  5. Laszlo Goerke, 2013. "Relative Consumption and Tax Evasion," IAAEU Discussion Papers 201301, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  6. Pfaff, Tobias & Hirata, Johannes, 2013. "Testing the Easterlin hypothesis with panel data: The dynamic relationship between life satisfaction and economic growth in Germany and in the UK," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79965, Verein für Socialpolitik / German Economic Association.
  7. Alessandro Balestrino, 2012. "Taxes, Status Goods, and Piracy," CESifo Working Paper Series 3704, CESifo Group Munich.
  8. Sébastien Rouillon, 2014. "Do Social Status Seeking Behaviors Worsen the Tragedy of the Commons?," Dynamic Games and Applications, Springer, vol. 4(1), pages 73-94, March.
  9. Foster, John, 2011. "Energy, aesthetics and knowledge in complex economic systems," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 88-100.
  10. Johansson-Stenman, Olof & Sterner, Thomas, 2011. "Discounting and Relative Consumption," Discussion Papers dp-11-38, Resources For the Future.
  11. Tobias Pfaff & Johannes Hirata, 2013. "Testing the Easterlin Hypothesis with Panel Data: The Dynamic Relationship between Life Satisfaction and Economic Growth in Germany and the UK," SOEPpapers on Multidisciplinary Panel Data Research 554, DIW Berlin, The German Socio-Economic Panel (SOEP).
  12. Gabriel Fagan & Vito Gaspar & Peter McAdam, 2014. "Kant’s Endogenous Growth Mechanism," School of Economics Discussion Papers 0214, School of Economics, University of Surrey.
  13. Easterlin, Richard A. & Angelescu McVey, Laura & Switek, Malgorzata & Sawangfa, Onnicha & Zweig, Jacqueline Smith, 2011. "The Happiness-Income Paradox Revisited," IZA Discussion Papers 5799, Institute for the Study of Labor (IZA).

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