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Economic Growth and the Relativity of Satisfaction

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  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

We extent Ramsey’s model to be in accordance with the facts that self-reported satisfaction levels are almost unrelated to economic prosperity, both across countries and across time. We assume that things are judged by the extent to which they depart from collective norms. Norms are based on the past experience of all agents. A special case is when norms are build on the basis of the best previous experience. Agents do not internalize their own effect on collective norms and the competitive equilibrium is thus sub-optimal. An optimal solution could however be decentralized by a planner. The dynamics displays oscillations, slow adjustment speed or path dependency and substantial transitory effects of fiscal policy.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1995023.

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Length: 18
Date of creation: 01 Aug 1995
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Handle: RePEc:ctl:louvir:1995023

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References

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  1. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  2. Ferson, Wayne E. & Constantinides, George M., 1991. "Habit persistence and durability in aggregate consumption: Empirical tests," Journal of Financial Economics, Elsevier, Elsevier, vol. 29(2), pages 199-240, October.
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  13. de la Croix, David, 1996. "The dynamics of bequeathed tastes," Economics Letters, Elsevier, Elsevier, vol. 53(1), pages 89-96, October.
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  15. de La Croix, D. & Michel, P., 1997. "Optimal Growth When Tastes Are Inherited," G.R.E.Q.A.M., Universite Aix-Marseille III 97a21, Universite Aix-Marseille III.
  16. Ruut Veenhoven, 1991. "Is happiness relative?," Social Indicators Research, Springer, Springer, vol. 24(1), pages 1-34, February.
  17. Layard, Richard, 1980. "Human Satisfactions and Public Policy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(363), pages 737-50, December.
  18. de la Croix, David & Palm, Franz C. & Pfann, Gerard A., 1996. "A dynamic contracting model for wages and employment in three European economies," European Economic Review, Elsevier, Elsevier, vol. 40(2), pages 429-448, February.
  19. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 19(4), pages 711-734, May.
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Citations

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Cited by:
  1. Dimitrios Varvarigos, 2010. "Non-Monotonic Welfare Dynamics in a Model of Sustained Income Growth," Discussion Papers in Economics 10/02, Department of Economics, University of Leicester.
  2. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew J. & Qian, Jing, 2005. "Does Wage Rank Affect Employees' Wellbeing?," IZA Discussion Papers 1505, Institute for the Study of Labor (IZA).
  3. Thi Kim Cuong PHAM & Phu NGUYEN-VAN, 2009. "Endogenous Fiscal Policies, Environmental Quality, and Status-Seeking Behavior," Working Papers of BETA 2009-22, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  4. Lionel Artige & Carmen Camacho & David De La Croix, 2004. "Wealth Breeds Decline: Reversals of Leadership and Consumption Habits," Journal of Economic Growth, Springer, Springer, vol. 9(4), pages 423-449, December.
  5. Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2006. "Welfare Implications Of The Interaction Between Habits And Consumption Externalities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 557-571, 05.
  6. Fabrice Collard & David de la Croix, 2000. "Gift Exchange and the Business Cycle: The Fair Wage Strikes Back," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 166-193, January.
  7. Théophile AZOMAHOU & Phu NGUYEN VAN & T. Kim-Cuong PHAM, 2003. "Relativité de la satisfaction dans la vie : une étude sur données de panel," Working Papers of BETA 2003-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  8. Patterson, Trista M. & Niccolucci, Valentina & Bastianoni, Simone, 2007. "Beyond "more is better": Ecological footprint accounting for tourism and consumption in Val di Merse, Italy," Ecological Economics, Elsevier, Elsevier, vol. 62(3-4), pages 747-756, May.
  9. Easterlin, Richard A. & Sawangfa, Onnicha, 2007. "Happiness and Domain Satisfaction: Theory and Evidence," IZA Discussion Papers 2584, Institute for the Study of Labor (IZA).
  10. Varvarigos, Dimitrios, 2011. "Non-monotonic welfare dynamics in a growing economy," Journal of Macroeconomics, Elsevier, Elsevier, vol. 33(2), pages 303-312, June.
  11. de la Croix, David, 1996. "Economic development and convergence clubs: the role of inherited tastes and human capital," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 1996024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1996.
  12. Jaime Alonso-Carrera & Jordi Caball?Author-Email: jordi.caballe@uab.es & Xavier Raurich, 2001. "Income Taxation with Habit Formation and Consumption Externalities," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 496.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  13. Easterlin, Richard A., 2001. "Life cycle welfare: evidence and conjecture," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 30(1), pages 31-61, January.

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