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Status Effects and Negative Utility Growth

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  • Ben Cooper
  • Cecilia Garcia-Penalosa
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    Abstract

    This paper explains the observed stagnation of `happiness` measures in the post-war period through a growth model in which agents care about conspicuous consumption. There are two goods: a `normal good` and a `status good`. Normal goods confer direct utility, while status goods confer utility only at the expense of someone who consumes less of the good. Firms can improve the quality of both goods through R&D. We show that the Nash equilibrium of the game in which consumers compete for status results in the share of expenditure on status goods increasing with the number of times the status good has been improved. As the economy grows, resources for innovation are transferred entirely to status-good R&D and the rate of improvement of normal good drops to zero. Improvement in status goods have only a negative effect on utility, consequently the long-run rate of utility growth is negative

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    File URL: http://www.nuff.ox.ac.uk/economics/papers/1998/w22/futilegrowth5.pdf
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    Bibliographic Info

    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 1998-W22.

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    Date of creation: 01 Dec 1998
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    Handle: RePEc:oxf:wpaper:1998-w22

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    1. Ng, Yew-Kwang, 1997. "A Case for Happiness, Cardinalism, and Interpersonal Comparability," Economic Journal, Royal Economic Society, vol. 107(445), pages 1848-58, November.
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    Cited by:
    1. Paul David & Gavin Wright, 1999. "General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution," Economics Series Working Papers 1999-W31, University of Oxford, Department of Economics.
    2. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2003. "The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth," CEPR Discussion Papers 3712, C.E.P.R. Discussion Papers.
    3. Mohammad Niaz Asadullah, 2006. "Educational Disparity in East and West Pakistan, 1947-71: Was East Pakistan Discriminated Against?," Economics Series Working Papers 2006-W63, University of Oxford, Department of Economics.
    4. James Malcomson & Martin Chalkley, 2001. "Cost Sharing in Health Service Provision: An Empirical Assessment of Cost Savings," Economics Series Working Papers 69, University of Oxford, Department of Economics.
    5. Liam Brunt, 1999. "An Arbitrage Model in Crop Rotation in 18th Century England," Economics Series Working Papers 1999-W32, University of Oxford, Department of Economics.
    6. Ed Hopkins & Tatiana Kornienko, 2005. "Inequality and Growth in the Presence of Competition for Status," Levine's Bibliography 122247000000000554, UCLA Department of Economics.
    7. Federico Varese & Meir Yaish, 1998. "Altruism:The Importance of Being Asked. The Rescue of Jews in Nazi Europe," Economics Series Working Papers 1998-W24, University of Oxford, Department of Economics.
    8. J.Humphries & T. Leunig, 2007. "Cities, Market Integration and Going to Sea: Stunting and the standard of living in early nineteenth-century England and Wales," Oxford University Economic and Social History Series _066, Economics Group, Nuffield College, University of Oxford.
    9. Regina Grafe & Camilla Brautaset, 2006. "The Quiet Transport Revolution: Returns to Scale, Scope and Network Density in Norway`s Nineteenth-Century Sailing Fleet," Economics Series Working Papers 2006-W62, University of Oxford, Department of Economics.

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