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Luxury and Wealth Accumulation

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  • Ikeda, S.

Abstract

This paper develops a model of luxury goods by incorporating weakly non-separable, recursive preferences. In a two-good framework, a quasi-luxury is de ned as a good whose marginal rate of substitution is increasing in wealth. Under certain conditions, it is identical to a luxury good. Consumers wait for quasi-luxuries more (less) patiently than for quasi-necessities when they expect to be happier (unhappier) in the future. The preference for quasi-luxuries promotes optimal wealth accumulation and hence growth. In a two-country economy, the less patient country with stronger quasi-luxury preferences can be wealthier than the more patient country.

Suggested Citation

  • Ikeda, S., 2001. "Luxury and Wealth Accumulation," ISER Discussion Paper 0528, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0528
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    References listed on IDEAS

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    More about this item

    Keywords

    WEALTH ; WEALTH DISTRIBUTION ; PREFERENCES;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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