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Standard-of-Living Aspirations and Economic Cycles

Listed author(s):
  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Past experiences and social forces have been incorporated into tastes in order to analyze various microeconomic issues. We use these extended preferences to model the making of standard-of-living aspirations and study their effect on macroeconomic variables. We concentrate first on consumption behavior when there is habit formation. Such behavior is in accordance with several empirical facts and has important policy implications. Secondly, long term issues are analyzed assuming that children become habituated to a standard-of-living whilst still with their parents. This introduces a powerful mechanism responsible for long-term oscillations. We investigate in the third part whether habits applied to wage formation explain key labor market stylized facts.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2000008.

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Length: 24
Date of creation: 01 Feb 2000
Handle: RePEc:ctl:louvir:2000008
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  1. Jeffrey C. Fuhrer & Michael W. Klein, 2006. "Risky Habits: on Risk Sharing, Habit Formation, and the Interpretation of International Consumption Correlations," Review of International Economics, Wiley Blackwell, vol. 14(4), pages 722-740, 09.
  2. Jean-Pierre Urbain & Franz Palm & David de la Croix, 2000. "Labor market dynamics when effort depends on wage growth comparisons," Empirical Economics, Springer, vol. 25(3), pages 393-419.
  3. John Campbell & Angus Deaton, 1989. "Why is Consumption So Smooth?," Review of Economic Studies, Oxford University Press, vol. 56(3), pages 357-373.
  4. de la Croix, David & Michel, Philippe, 1997. "Altruism and self-refrain," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Apr 1998.
  5. Aylin Seckin, 2000. "Consumption with Habit Formation," CIRANO Working Papers 2000s-39, CIRANO.
  6. Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
  7. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-543, June.
  8. Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice Under Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 51-78.
  9. Jan Reijnders, 1990. "Long Waves in Economic Development," Books, Edward Elgar Publishing, number 366.
  10. van Ewijk, Casper, 1982. "A Spectral Analysis of the Kondratieff-Cycle," Kyklos, Wiley Blackwell, vol. 35(3), pages 468-499.
  11. Clark, Andrew E. & Oswald, Andrew J. & Warr, Peter B., 1994. "Is job satisfaction u-shaped in age ?," CEPREMAP Working Papers (Couverture Orange) 9407, CEPREMAP.
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