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Keeping up with the Ageing Joneses Author info | Abstract | Publisher info | Download info | Related research | Statistics Fisher, Walter H. (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
Heijdra, Ben J. (Department of Economics, University of Groningen, Groningen, The Netherlands)
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In this paper we consider the implications of relative consumption externalities in the Blanchard-Yaari overlapping generations framework. Unlike most of the macroeconomic literature that studies this question, the differences between agents, and, thus, in their relative position, persist in equilibrium. We show in our fixed employment model that consumption externalities lower consumption and the capital stock in long-run equilibrium, a result in sharp contrast to the recent findings of Liu and Turnovsky (2005). In addition, we solve for the intertemporal path of the economy to investigate its response to demographic shocks, specifically, to permanent changes in the birth and death rates.
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Paper provided by Institute for Advanced Studies in its series Economics Series with number
204.
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Length: 26 pages
Date of creation: Mar 2007Date of revision:
Handle: RePEc:ihs:ihsesp:204Contact details of provider: Postal: Stumpergasse 56, A-1060 Vienna, Austria Phone: ++43 - (0)1 - 599 91 - 0 Fax: ++43 - (0)1 - 599 91 - 555 Web page: http://www.ihs.ac.at/index.php3?id=310 More information through EDIRC
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Keywords: Relative consumption Overlapping generations Demographic shocks Other versions of this item:
Find related papers by JEL classification: D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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