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Keeping up with the ageing Joneses

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  • Fisher, Walter H.
  • Heijdra, Ben J.

Abstract

In this paper we consider the implications of relative consumption externalities in the Blanchard-Yaari overlapping generations framework. Unlike most of the macroeconomic literature that studies this question, the differences between agents, and, thus, in their relative position, persist in equilibrium. We show in our fixed employment model that consumption externalities lower consumption and the capital stock in long-run equilibrium, a result in sharp contrast to the recent findings of Liu and Turnovsky [2005. Consumption externalities, production externalities, and the accumulation of capital. Journal of Public Economics 89, 1097-1129]. In addition, we solve for the intertemporal path of the economy to investigate its response to demographic shocks, specifically, to permanent changes in the birth and death rates.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 1 (January)
Pages: 53-64

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:1:p:53-64

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Relative consumption Overlapping generations Demographic shocks;

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References

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  5. Heijdra, B.J. & Ligthart, J.E., 2004. "The Macroeconomic Dynamics of Demographic Shocks," Discussion Paper 2004-90, Tilburg University, Center for Economic Research.
  6. Bovenberg, A. Lans & Heijdra, Ben J., 1999. "Environmental abatement and intergenerational distribution," CCSO Working Papers 199907, University of Groningen, CCSO Centre for Economic Research.
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Citations

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Cited by:
  1. Wendner, Ronald, 2010. "Conspicuous consumption and generation replacement in a model of perpetual youth," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1093-1107, December.
  2. Francisco Alvarez-Cuadrado & Ngo Van Long, 2008. "The Relative Income Hypothesis," CIRANO Working Papers 2008s-18, CIRANO.
  3. Ronald Wendner, 2009. "Conspicuous Consumption and Overlapping Generations?," EERI Research Paper Series EERI_RP_2009_05, Economics and Econometrics Research Institute (EERI), Brussels.
  4. Francisco Alvarez-Cuadrado & Ngo Van Long, 2009. "Envy And Inequality," Departmental Working Papers 2009-03, McGill University, Department of Economics.
  5. Yutaro Hatta, 2013. "Wealth Distribution Dynamics with Status Preference: asymmetric motivations for status," Discussion Papers in Economics and Business 13-08, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  6. Wendner, Ronald, 2010. "Growth And Keeping Up With The Joneses," Macroeconomic Dynamics, Cambridge University Press, vol. 14(S2), pages 176-199, November.
  7. Walter H. Fisher & Ben J. Heijdra, 2008. "Growth and the Ageing Joneses," CESifo Working Paper Series 2466, CESifo Group Munich.
  8. Wendner, Ronald, 2008. "Externalities in a Model of Perpetual Youth with Age-Dependent Productivity," MPRA Paper 11335, University Library of Munich, Germany.

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