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Emulation and Consumer Debt: Implications of Keeping-Up with the Joneses

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  • Yun Kim

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    (Department of Economics, Trinity College)

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    Abstract

    We develop a stock-flow consistent neo-Kaleckian macro model which incorporates consumption emulation and consumer debt accumulation. Income distributional dimension is also incorporated via the conflict-claims approach of inflation. Using this model, we investigate the macroeconomic effects of lower income group's consumption emulation of higher income group through borrowing. We find that emulation could expand aggregate demand and hence generate a faster economic growth. Our results also indicate that consumption emulation could be a source of widening income inequality.

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    File URL: http://internet2.trincoll.edu/repec/WorkingPapers2012/WP12-08.pdf
    File Function: First version, 2012
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    Bibliographic Info

    Paper provided by Trinity College, Department of Economics in its series Working Papers with number 1208.

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    Length: 25 pages
    Date of creation: Sep 2012
    Date of revision:
    Handle: RePEc:tri:wpaper:1208

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    Web page: http://www.trincoll.edu/Academics/MajorsAndMinors/Economics/Pages/default.aspx
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    Keywords: consumer debt; emulation; income distribution; growth;

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    1. Amitava Krishna Dutt, 2008. "The Dependence Effect, Consumption and Happiness: Galbraith Revisited," Review of Political Economy, Taylor & Francis Journals, vol. 20(4), pages 527-550.
    2. SĂ©bastien Charles, 2008. "Corporate debt, variable retention rate and the appearance of financial fragility," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 781-795, September.
    3. Samuel Bowles & Yongjin Park, 2005. "Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right?," Economic Journal, Royal Economic Society, vol. 115(507), pages F397-F412, November.
    4. Eckhard Hein, 2005. "Interest, debt and capital accumulation - a Kaleckian approach," Macroeconomics 0510007, EconWPA.
    5. Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 13(3), pages 395-412, September.
    6. Amitava Krishna Dutt, 2006. "Maturity, Stagnation And Consumer Debt: A Steindlian Approach," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 339-364, 07.
    7. Robert A. Blecker, 2010. "Open economy models of distribution and growth," Working Papers 2010-03, American University, Department of Economics.
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