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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
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  9. 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.
  10. 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.
  11. 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.
  12. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," CEPR Discussion Papers 1350, C.E.P.R. Discussion Papers.
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  17. Kazuo Mino, 2007. "Growth and Bubbles with Consumption Externalities," Discussion Papers in Economics and Business 07-07, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  18. Heng-fu Zou, 1991. "The spirit of capitalism and long-run growth," Policy Research Working Paper Series 630, The World Bank.
  19. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
  20. 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.
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  23. Katsunori Yamada & Atsushi Sannabe & Takashi Saito, 2005. "Satisfaction and Comparison Income in Japan: evidence from data of Japanese union workers," Economics Bulletin, AccessEcon, vol. 4(17), pages 1-20.
  24. 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.
  25. 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.
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  27. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
  28. 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.
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