Consumption Externalities, Heterogeneous Agents and Cycles
This paper studies the e¤ect of consumption externalities in a Ramsey model with heterogeneous agents and borrowing constraints. We consider two types of agents who di¤er in their initial wealth and discount factors. Further, we leave open the possibility of increase in consumption of one agent producing a positive (Keeping-Up with the Joneses) or a negative (Running-Away from the Joneses) effet over the marginal utility from own consumption of the other agent. We show that, at a steady-state equi- librium, inequality arises across agents which in turn implies that, agents have different consumption levels. Moreover, we show that, whenever the preferences display Keeping-Up with the Joneses feature, low elasticity of production factors substitution is no longer needed for the emergence of flip cycles and instability. Instead, only the external effects in consump- tion that plays a crucial role and promotes instability and the appearence of these endogeneous cycles.
|Date of creation:||2009|
|Contact details of provider:|| Postal: 4, bld Francois Mitterand, 91025 Evry Cedex|
Phone: +33 1 69 47 71 77
Fax: +33 1 69 47 70 50
Web page: http://epee.univ-evry.fr
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.:
- Chen, Been-Lon & Hsu, Mei, 2007. "Admiration is a source of indeterminacy," Economics Letters, Elsevier, vol. 95(1), pages 96-103, April.
- Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2005.
"Can consumption spillovers be a source of equilibrium indeterminacy?,"
154, Barcelona Graduate School of Economics.
- Alonso-Carrera, Jaime & Caballé, Jordi & Raurich, Xavier, 2008. "Can consumption spillovers be a source of equilibrium indeterminacy?," Journal of Economic Dynamics and Control, Elsevier, vol. 32(9), pages 2883-2902, September.
- Jaime Alonso-Carrera & Jordi caballe & Xavier Raurich, 2007. "Can Consumption Spillovers Be A Source Of Equilibrium Indeterminacy?," CAMA Working Papers 2007-13, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2005. "Can consumption spillovers be a source of equilibrium indeterminacy?," UFAE and IAE Working Papers 657.05, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Jaime Alonso-Carrera & Jordi CaballÃ© & Xavier Raurich, 2005. "Can consumption spillovers be a source of equilibrium indeterminacy?," 2005 Meeting Papers 362, Society for Economic Dynamics.
- Oswald, A.J., 1997.
"Happiness and Economic Performance,"
18, Centre for Economic Performance & Institute of Economics.
- Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS) 478, University of Warwick, Department of Economics.
- Cecilia García-Peñalosa & Stephen Turnovsky, 2008. "Consumption externalities: a representative consumer model when agents are heterogeneous," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(3), pages 439-467, December.
- Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
- Clark, Andrew E. & Oswald, Andrew J., 1996.
"Satisfaction and comparison income,"
Journal of Public Economics,
Elsevier, vol. 61(3), pages 359-381, September.
- Clark, Andrew E. & Oswald, Andrew J., 1994. "Satisfaction and comparison income," CEPREMAP Working Papers (Couverture Orange) 9408, CEPREMAP.
- Clark, Andrew E & Oswald, Andrew J, 1993. "Satisfaction and Comparison Income," Economics Discussion Papers 10018, University of Essex, Department of Economics.
- Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
- Grandmont, Jean-Michel & Pintus, Patrick & de Vilder, Robin, 1998.
"Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles,"
Journal of Economic Theory,
Elsevier, vol. 80(1), pages 14-59, May.
- GRANDMONT, Jean-Michel & PINTUS, Patrick & de VILDER, Robin, 1997. "Capital-labor substitution and competitive nonlinear endogenous business cycles," CORE Discussion Papers 1997087, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jean-Michel Grandmont & P, A, Pintus & R, De Vilder, 1997. "Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles," Working Papers 97-28, Centre de Recherche en Economie et Statistique.
- Gali, J., 1992.
"Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice and Asset Prices,"
92-22, Columbia - Graduate School of Business.
- Gali, Jordi, 1994. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice, and Asset Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 1-8, February.
- Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
- Becker, Robert A & Foias, Ciprian, 1994.
"The Local Bifurcation of Ramsey Equilibrium,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(5), pages 719-744, August.
- 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.
- Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
- 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.
- Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 375-382.
When requesting a correction, please mention this item's handle: RePEc:eve:wpaper:09-02. 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: (Samuel Nosel)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.