When Veblen meets Krugman
We introduce relative concerns in the form of conspicuous consumption in a standard economic geography model a la Krugman. The primary intuition is that conspicuous consumption imposes a negative externality on some agents and generates a centrifugal force. We show that this is not always the case as the relative concern also rises the demand for the sophisticated good, strengthening the standard centripetal market size effect. We show that the resulting force is very sensitive to the topology of the network of "conspicuous" links in each region and on the level of economic integration. For instance, with relatively large shares of income devoted to the consumption of the standard good, we show that when trade is moderately costly and classes of workers are segregated, relative concerns tends to stabilize the symmetric equilibrium; on the other hand, if workers of different classes interact via their relative concerns, conspicuous consumption is a centripetal force generating stable fully or partially agglomerated equilibria. Finally, when the level of integration is high, the intuition holds and even small relative concerns destabilize the full agglomeration equilibrium, which is stable in the Krugman model.
|Date of creation:||Sep 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +45 6550 2233
Fax: +45 6550 1090
Web page: http://degit.sam.sdu.dk/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew B. Abel, 1990.
"Asset Prices under Habit Formation and Catching up with the Joneses,"
NBER Working Papers
3279, National Bureau of Economic Research, Inc.
- 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.
- Abel, A.B., 1990. "Asset Prices Under Habit Formation And Catching Up With The Joneses," Weiss Center Working Papers 1-90, Wharton School - Weiss Center for International Financial Research.
- Andrew B. Abel, . "Asset Prices Under Habit Formation and Catching Up With the Jones," Rodney L. White Center for Financial Research Working Papers 1-90, Wharton School Rodney L. White Center for Financial Research.
- A. Abel, 2010. "Asset prices under habit formation and catching up with the Jones," Levine's Working Paper Archive 1395, David K. Levine.
- Andrew B. Abel, . "Asset Prices Under Habit Formation and Catching Up With the Jones," Rodney L. White Center for Financial Research Working Papers 01-90, Wharton School Rodney L. White Center for Financial Research.
- Pflüger, Michael P. & Suedekum, Jens, 2007.
"On Pitchforks and Tomahawks,"
IZA Discussion Papers
3258, Institute for the Study of Labor (IZA).
- Tabuchi, Takatoshi & Thisse, Jacques-François, 2001.
"Taste Heterogeneity, Labour Mobility and Economic Geography,"
CEPR Discussion Papers
3114, C.E.P.R. Discussion Papers.
- Tabuchi, Takatoshi & Thisse, Jacques-Francois, 2002. "Taste heterogeneity, labor mobility and economic geography," Journal of Development Economics, Elsevier, vol. 69(1), pages 155-177, October.
- TABUCHI, Takatoshi & THISSE, Jacques-FranÃ§ois, 2001. "Taste heterogeneity, labor mobility and economic geography," CORE Discussion Papers 2001044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ludema, Rodney D & Wooton, Ian, 1997.
"Regional Integration, Trade, and Migration: Are Demand Linkages Relevant in Europe?,"
CEPR Discussion Papers
1656, C.E.P.R. Discussion Papers.
- Rodney D. Ludema & Ian Wooton, 1998. "Regional Integration, Trade, and Migration: Are Demand Linkages Relevant in Europe?," International Trade 9802001, EconWPA.
- Rodney D. Ludema & Ian Wooton, 1997. "Regional Integration, Trade, and Migration: Are Demand Linkages Relevant in Europe?," Working Papers 9704, Business School - Economics, University of Glasgow, revised Jul 1997.
- Liu, Xiaodong & Patacchini, Eleonora & Zenou, Yves, 2011.
"Peer Effects in Education, Sport, and Screen Activities: Local Aggregate or Local Average?,"
CEPR Discussion Papers
8477, C.E.P.R. Discussion Papers.
- eleonora patacchini & Yves Zenou & Xiaodong Liu, 2012. "Peer effects in education, sport and screen activities: local aggregate or local average?," 2012 Meeting Papers 1198, Society for Economic Dynamics.
- Antonella Nocco, 2009. "Preference Heterogeneity And Economic Geography," Journal of Regional Science, Wiley Blackwell, vol. 49(1), pages 33-56.
- Christian Ghiglino & Sanjeev Goyal, 2010.
"Keeping Up with the Neighbors: Social Interaction in a Market Economy,"
Journal of the European Economic Association,
MIT Press, vol. 8(1), pages 90-119, 03.
- Christian Ghiglino & Sanjeev Goyal, 2008. "Keeping up with the neighbours: social interaction in a market economy," Economics Discussion Papers 655, University of Essex, Department of Economics.
- Berliant, Marcus & Kung, Fan-chin, 2009.
"Bifurcations in Regional Migration Dynamics,"
13053, University Library of Munich, Germany.
- Murata, Yasusada, 2003. "Product diversity, taste heterogeneity, and geographic distribution of economic activities:: market vs. non-market interactions," Journal of Urban Economics, Elsevier, vol. 53(1), pages 126-144, January.
- 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.
- 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.
- Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
- Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c017_030. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Pedersen)
If references are entirely missing, you can add them using this form.