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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. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
  2. Kazuo Mino, 2008. "Growth And Bubbles With Consumption Externalities," The Japanese Economic Review, Japanese Economic Association, vol. 59(1), pages 33-53.
  3. Zou, Heng-fu, 1994. "'The spirit of capitalism' and long-run growth," European Journal of Political Economy, Elsevier, vol. 10(2), pages 279-293, July.
  4. 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.
  5. Slottje, Daniel J., 1992. "Is there conspicuous consumption in Japan?," Japan and the World Economy, Elsevier, vol. 4(4), pages 333-342, December.
  6. Bakshi, Gurdip S & Chen, Zhiwu, 1996. "The Spirit of Capitalism and Stock-Market Prices," American Economic Review, American Economic Association, vol. 86(1), pages 133-57, March.
  7. A. Abel, 2010. "Asset prices under habit formation and catching up with the Jones," Levine's Working Paper Archive 1395, David K. Levine.
  8. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  9. 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.
  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. 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.
  12. Gali, J., 1992. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice and Asset Prices," Papers 92-22, Columbia - Graduate School of Business.
  13. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . ""Incorporating Concern for Relative Wealth into Economic Models''," CARESS Working Papres 95-14, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  14. 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.
  15. 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.
  16. 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.
  17. 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.
  18. 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.
  19. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-69, July.
  20. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc.
  21. Rao, Vijayendra, 2001. "Poverty and public celebrations in rural India," Policy Research Working Paper Series 2528, The World Bank.
  22. repec:ebl:ecbull:v:4:y:2005:i:17:p:1-20 is not listed on IDEAS
  23. 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.
  24. 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.
  25. Konrad, Kai A., 1992. "Wealth seeking reconsidered," Journal of Economic Behavior & Organization, Elsevier, vol. 18(2), pages 215-227, July.
  26. 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.
  27. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
  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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