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Non-monotonic welfare dynamics in a growing economy

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  • Varvarigos, Dimitrios
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    Abstract

    In an overlapping generations economy with endogenous income growth, I combine themes from the work of Cooper et al. (2001), Kapur (2005) and Eaton and Eswaran (2009) in order to provide an example of an economy whose welfare dynamics are non-monotonic. Particularly, the evolution of social welfare can be distinguished between two different regimes that arise naturally during the process of economic development. At relatively early stages, status concerns are inactive and welfare increases following the rising consumption of normal goods. During the later stages, however, individuals engage in some type of status competition that does not allow consumption to improve their well-being: their welfare actually declines as successive generations of agents increase labour effort at the expense of leisure.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 33 (2011)
    Issue (Month): 2 (June)
    Pages: 303-312

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    Handle: RePEc:eee:jmacro:v:33:y:2011:i:2:p:303-312

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    Web page: http://www.elsevier.com/locate/inca/622617

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    Keywords: Welfare Economic growth Status goods Leisure;

    References

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    1. Golden, Lonnie & Wiens-Tuers, Barbara, 2006. "To your happiness? Extra hours of labor supply and worker well-being," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(2), pages 382-397, April.
    2. B.Curtis Eaton & Mukesh Eswaran, 2009. "Well-being and Affluence in the Presence of a Veblen Good," Economic Journal, Royal Economic Society, vol. 119(539), pages 1088-1104, 07.
    3. Samuel Bowles & Yongjin Park, 2004. "Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right?," UMASS Amherst Economics Working Papers 2004-14, University of Massachusetts Amherst, Department of Economics.
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    5. Luttmer, Erzo F. P., 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," Working Paper Series rwp04-029, Harvard University, John F. Kennedy School of Government.
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    7. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc.
    8. Michael Hagerty & Ruut Veenhoven, 2003. "Wealth and Happiness Revisited – Growing National Income Does Go with Greater Happiness," Social Indicators Research, Springer, vol. 64(1), pages 1-27, October.
    9. Richard Easterlin, 2005. "Feeding the Illusion of Growth and Happiness: A Reply to Hagerty and Veenhoven," Social Indicators Research, Springer, vol. 74(3), pages 429-443, December.
    10. Mark Wooden & Diana Warren, 2007. "Paid Annual Leave and Working Hours," Melbourne Institute Working Paper Series wp2007n20, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    11. Baochun Peng, 2008. "Relative deprivation, wealth inequality and economic growth," Journal of Economics, Springer, vol. 94(3), pages 223-229, September.
    12. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
    13. Basant Kapur, 2005. "Can faster income growth reduce well-being?," Social Choice and Welfare, Springer, vol. 25(1), pages 155-171, October.
    14. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    15. J. Solnick, Sara & Hemenway, David, 1998. "Is more always better?: A survey on positional concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 373-383, November.
    16. de la Croix, David, 1998. "Growth and the relativity of satisfaction," Mathematical Social Sciences, Elsevier, vol. 36(2), pages 105-125, September.
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