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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

    Related research

    Keywords: Welfare Economic growth Status goods Leisure;

    References

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    1. 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.
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    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.
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    15. 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.
    16. Golden, Lonnie & Wiens-Tuers, Barbara, 2006. "To your happiness? Extra hours of labor supply and worker well-being," The Journal of Socio-Economics, Elsevier, vol. 35(2), pages 382-397, April.
    17. 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.
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