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Growth and the relativity of satisfaction

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  • de la Croix, David

Abstract

We extent Ramsey’s model to be in accordance with the facts that self-reported satisfaction levels are almost unrelated to economic prosperity, both across countries and across time. We assume that things are judged by the extent to which they depart from collective norms. Norms are based on the past experience of all agents. A special case is when norms are build on the basis of the best previous experience. Agents do not internalize their own effect on collective norms and the competitive equilibrium is thus sub-optimal. An optimal solution could however be decentralized by a planner. The dynamics displays oscillations, slow adjustment speed or path dependency and substantial transitory effects of fiscal policy.
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  • de la Croix, David, 1998. "Growth and the relativity of satisfaction," Mathematical Social Sciences, Elsevier, vol. 36(2), pages 105-125, September.
  • Handle: RePEc:eee:matsoc:v:36:y:1998:i:2:p:105-125
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    1. Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2006. "Welfare Implications Of The Interaction Between Habits And Consumption Externalities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 557-571, May.
    2. Patterson, Trista M. & Niccolucci, Valentina & Bastianoni, Simone, 2007. "Beyond "more is better": Ecological footprint accounting for tourism and consumption in Val di Merse, Italy," Ecological Economics, Elsevier, vol. 62(3-4), pages 747-756, May.
    3. Bahadır Dursun & Resul Cesur, 2016. "Transforming lives: the impact of compulsory schooling on hope and happiness," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(3), pages 911-956, July.
    4. Fabrice Collard & David de la Croix, 2000. "Gift Exchange and the Business Cycle: The Fair Wage Strikes Back," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 166-193, January.
    5. Jaime Alonso-Carrera & Jordi Caball?Author-Email: jordi.caballe@uab.es & Xavier Raurich, 2001. "Income Taxation with Habit Formation and Consumption Externalities," UFAE and IAE Working Papers 496.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    6. Easterlin, Richard A., 2001. "Life cycle welfare: evidence and conjecture," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 30(1), pages 31-61, January.
    7. Varvarigos, Dimitrios, 2011. "Non-monotonic welfare dynamics in a growing economy," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 303-312, June.
    8. Nguyen-Van, Phu & Pham, Thi Kim Cuong, 2013. "Endogenous fiscal policies, environmental quality, and status-seeking behavior," Ecological Economics, Elsevier, vol. 88(C), pages 32-40.
    9. de la Croix, David, 2001. "Growth dynamics and education spending: The role of inherited tastes and abilities," European Economic Review, Elsevier, vol. 45(8), pages 1415-1438, August.
    10. Lionel Artige & Carmen Camacho & David De La Croix, 2004. "Wealth Breeds Decline: Reversals of Leadership and Consumption Habits," Journal of Economic Growth, Springer, vol. 9(4), pages 423-449, December.
    11. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew J. & Qian, Jing, 2005. "Does Wage Rank Affect Employees' Wellbeing?," IZA Discussion Papers 1505, Institute of Labor Economics (IZA).
    12. Dimitrios Varvarigos, 2010. "Non-Monotonic Welfare Dynamics in a Model of Sustained Income Growth," Discussion Papers in Economics 10/02, Division of Economics, School of Business, University of Leicester.
    13. Easterlin, Richard A. & Sawangfa, Onnicha, 2007. "Happiness and Domain Satisfaction: Theory and Evidence," IZA Discussion Papers 2584, Institute of Labor Economics (IZA).
    14. Strulik, Holger, 2015. "Preferences, income, and life satisfaction: An equivalence result," Mathematical Social Sciences, Elsevier, vol. 75(C), pages 20-26.
    15. Théophile AZOMAHOU & Phu NGUYEN VAN & T. Kim-Cuong PHAM, 2003. "Relativité de la satisfaction dans la vie : une étude sur données de panel," Working Papers of BETA 2003-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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