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Growth Effects of Consumption Jealousy in a Two-Sector Model

Author

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  • Duernecker, Georg

    (Department of Economics, European University Institute, Florence, Italy)

Abstract

This paper aims at analyzing the implications of individuals’ consumption jealousy on the dynamic structure of a two-sector model economy. We find that status-seeking substantially influences both, the long-term properties and the adjustment behavior of the model. Depending on the status motive, productivity disturbances might induce countercyclical responses of work effort whereas preference shocks are expected to generate an overshooting relative capital intensity. Generally we find that, for empirically plausible values of the intertemporal elasticity of substitution, a higher degree of consumption jealousy induces agents to devote more time to education which stimulates human capital accumulation and hence promotes economic growth.

Suggested Citation

  • Duernecker, Georg, 2007. "Growth Effects of Consumption Jealousy in a Two-Sector Model," Economics Series 201, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:201
    as

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    File URL: http://www.ihs.ac.at/publications/eco/es-201.pdf
    File Function: First version, 2007
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    References listed on IDEAS

    as
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    Cited by:

    1. Hiraguchi, Ryoji, 2011. "A two sector endogenous growth model with habit formation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 430-441, April.

    More about this item

    Keywords

    Status-seeking; Economic growth; Transitional dynamics; Human capital;

    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
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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