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Macroeconomic implications of conspicuous consumption: A Sombartian dynamic model

  • Yamada, Katsunori

This paper presents a dynamic general equilibrium model in which consumers have status preference. I investigate the manner in which capital accumulation is impeded by conspicuous consumption i la Corneo and Jeanne [Corneo, G., Jeanne, O., 1997a. Conspicuous consumption, snobbism and conformism. Journal of Public Economics 66, 55-71]. Following the literature, social norms are given as either bandwagon type or snob type. I show that when the economy is characterized by a bandwagon type social norm, capital accumulation exhibits interesting patterns. Those patterns include, for example, an oscillating convergence path: the rise of the economy feeds its decay through conspicuous consumption and that decay suppresses conspicuous consumption and engenders prosperity, as predicted by Sombart [Sombart, W., 1912. Liebe, Luxus und Kapitalismus, Deutscher Taschenbuch Verlag, Germany (reprinted 1967)].

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 67 (2008)
Issue (Month): 1 (July)
Pages: 322-337

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Handle: RePEc:eee:jeborg:v:67:y:2008:i:1:p:322-337
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
  2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  3. Heng-fu Zou, 1995. "'The spirit of capitalism' and long-run growth," CEMA Working Papers 94, China Economics and Management Academy, Central University of Finance and Economics.
  4. Rao, Vijayendra, 2001. "Poverty and public celebrations in rural India," Policy Research Working Paper Series 2528, The World Bank.
  5. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-69, July.
  6. 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.
  7. Hirschman, Albert O, 1984. "Against Parsimony: Three Easy Ways of Complicating Some Categories of Economic Discourse," American Economic Review, American Economic Association, vol. 74(2), pages 89-96, May.
  8. Slottje, Daniel J., 1992. "Is there conspicuous consumption in Japan?," Japan and the World Economy, Elsevier, vol. 4(4), pages 333-342, December.
  9. 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.
  10. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-73, June.
  11. Gali, Jordi, 1994. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice, and Asset Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 1-8, February.
  12. Hayakawa, Hiroaki, 2000. "Bounded rationality, social and cultural norms, and interdependence via reference groups," Journal of Economic Behavior & Organization, Elsevier, vol. 43(1), pages 1-34, September.
  13. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
  14. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Harold L. Cole & George J. Mailath & Andrew Postlewaite, 1995. "Incorporating concern for relative wealth into economic models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 12-21.
  16. Basu, Kaushik, 1989. "A Theory of Association: Social Status, Prices and Markets," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 653-71, October.
  17. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
  18. Frijters, Paul & Leigh, Andrew, 2008. "Materialism on the March: From conspicuous leisure to conspicuous consumption?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(5), pages 1937-1945, October.
  19. Corneo, Giacomo & Jeanne, Olivier, 1997. "Snobs, bandwagons, and the origin of social customs in consumer behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 32(3), pages 333-347, March.
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  23. 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.
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  25. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  26. Hollander, Heinz, 2001. "On the validity of utility statements: standard theory versus Duesenberry's," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 227-249, July.
  27. Hayes, Kathy J & Molina, David J & Slottje, Daniel J, 1988. "Measuring Preference Variation across North America," Economica, London School of Economics and Political Science, vol. 55(220), pages 525-39, November.
  28. Konrad, Kai A., 1992. "Wealth seeking reconsidered," Journal of Economic Behavior & Organization, Elsevier, vol. 18(2), pages 215-227, July.
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