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Keeping-up with the Joneses, a new source of endogenous fluctuations

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  • Jean-Philippe Garnier

    (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

Abstract

Our main objective is to study the impact of consumption externality like keeping of with the Joneses on the properties of long-run equilibrium in the two-sector optimal growth model. Does this consumption externality lead to a new mechanism of local indeterminacy and endogenous fluctuations? We will see that, in two-sector growth models with exogenous labor and without technological externalities, if the representative agent is able to give more value to his social status than his own consumption, this is the keys of a new mechanism for endogenous fluctuations. Moreover, by opposition with the other endogenous fluctuation mechanisms, we will see that this one doesn't need to have restriction on the factor intensity configuration of the consumption sector.

Suggested Citation

  • Jean-Philippe Garnier, 2014. "Keeping-up with the Joneses, a new source of endogenous fluctuations," Working Papers hal-01006912, HAL.
    • Handle: RePEc:hal:wpaper:hal-01006912
    Note: View the original document on HAL open archive server: https://hal.univ-lille.fr/hal-01006912
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    File URL: https://hal.univ-lille.fr/hal-01006912/document
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    References listed on IDEAS

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    1. Garnier, Jean-Philippe & Nishimura, Kazuo & Venditti, Alain, 2013. "Local Indeterminacy In Continuous-Time Models: The Role Of Returns To Scale," Macroeconomic Dynamics, Cambridge University Press, vol. 17(2), pages 326-355, March.
    2. Jess Benhabib & Kazuo Nishimura, 2012. "Indeterminacy and Sunspots with Constant Returns," Springer Books, in: John Stachurski & Alain Venditti & Makoto Yano (ed.), Nonlinear Dynamics in Equilibrium Models, edition 127, chapter 0, pages 311-346, Springer.
    3. 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.
    4. Jean‐Philippe Garnier & Kazuo Nishimura & Alain Venditti, 2007. "Intertemporal substitution in consumption, labor supply elasticity and sunspot fluctuations in continuous‐time models," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(4), pages 235-259, December.
    5. Benhabib, Jess & Farmer, Roger E. A., 1996. "Indeterminacy and sector-specific externalities," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 421-443, June.
    6. Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448, Elsevier.
    7. Nathalie Chusseau & Michel Dumont, 2012. "Growing Income Inequalities in Advanced," Working Papers hal-00993359, HAL.
    8. Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
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    Cited by:

    1. Jean-Philippe Garnier, 2014. "Endogenous fluctutations: a financial transmission Mechanism," Working Papers hal-01006946, HAL.

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