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Growth or Stagnation: Economic Consequences of Status Preference

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  • Ono, Y.

Abstract

Using a dynamic optimization model with status preference this paper shows that depending on the object of people's status preference an economy exhibits a completely opposite performance; permanent growth or persistent stagnation. If the object is a producible asset (viz. real capital), new employment is created and extra production is invested in capital, which generates permanent growth even under decreasing returns to capital. If it is an unproducible asset (viz. money), commodity demand is not created and deflation occurs. Full employment is never reached under nominal wage sluggishness although prices and wages continue to adjust.

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File URL: http://www.iser.osaka-u.ac.jp/library/dp/2001/dp0524.pdf
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Bibliographic Info

Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0524.

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Length: 20 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:dpr:wpaper:0524

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Keywords: UNEMPLOYMENT ; INVESTMENTS ; CAPITAL;

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References

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  1. Zou, Heng-fu, 1994. "'The spirit of capitalism' and long-run growth," European Journal of Political Economy, Elsevier, vol. 10(2), pages 279-293, July.
  2. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
  3. Ono, Yoshiyasu, 2001. "A Reinterpretation of Chapter 17 of Keynes's General Theory: Effective Demand Shortage under Dynamic Optimization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 207-36, February.
  4. Christopher D. Carroll, 1998. "Why Do the Rich Save So Much?," NBER Working Papers 6549, National Bureau of Economic Research, Inc.
  5. Corneo, Giacomo & Jeanne, Olivier, 1999. "Social Organization in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 711-25, August.
  6. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  7. Heng-fu Zou, 1995. "The spirit of capitalism and savings behavior," CEMA Working Papers 79, China Economics and Management Academy, Central University of Finance and Economics.
  8. Michael Rauscher, 1997. "Conspicuous consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 66(1), pages 35-42, February.
  9. Gurdip S. Bakshi & Zhiwu Chen, 1996. "The Spirit of Capitalism and Stock-Market Prices," CEMA Working Papers 511, China Economics and Management Academy, Central University of Finance and Economics.
  10. Fershtman, C. & Murphy, K.M., 1993. "Social Status, Education and Growth," Papers 8-93, Tel Aviv.
  11. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November.
  12. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
  13. Heng-fu Zou, 1998. "The spirit of capitalism, social status, money, and accumulation," Journal of Economics, Springer, vol. 68(3), pages 219-233, October.
  14. Futagami, Koichi & Shibata, Akihisa, 1998. "Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 109-126, July.
  15. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
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