This paper develops a model of luxury goods by incorporating weakly non-separable, recursive preferences. In a two-good framework, a quasi-luxury is de ned as a good whose marginal rate of substitution is increasing in wealth. Under certain conditions, it is identical to a luxury good. Consumers wait for quasi-luxuries more (less) patiently than for quasi-necessities when they expect to be happier (unhappier) in the future. The preference for quasi-luxuries promotes optimal wealth accumulation and hence growth. In a two-country economy, the less patient country with stronger quasi-luxury preferences can be wealthier than the more patient country.
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Publisher Info
Paper provided by Osaka - Institute of Social and Economic Research in its series Papers with number
528.
Length: 31 pages Date of creation: 2001 Date of revision: Handle: RePEc:fth:osakae:528
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