IDEAS home Printed from https://ideas.repec.org/p/sce/scecf4/96.html
   My bibliography  Save this paper

Durable Consumption As A Status Good: A Study Of Neoclassical Cases

Author

Listed:
  • WALTER H. FISHER

Abstract

In this paper we extend the representative agent model of the consumer to incorporate durable consumption goods that generate status, where status depends on relative consumption. The study is done in the neoclassical context and incorporates analytical and numerical results. In the closed economy framework both endogenous and fixed employment cases are considered. A small open economy version of the model is also developed. We derive the intertemporal equilibria and establish that in all instances they are saddlepoint stable. Among our principle results, we show in the closed economy context with endogenous work effort that an increase in the degree of status preference raises durable consumption, its stock, employment, and physical capital. In addition, an increase in the status preference parameter affects the stable speeds of adjustment in the special case of fixed employment, depending on whether it raises or lowers the intertemporal elasticity of substitution. These results extend, in general, to the small open econom

Suggested Citation

  • Walter H. Fisher, 2004. "Durable Consumption As A Status Good: A Study Of Neoclassical Cases," Computing in Economics and Finance 2004 96, Society for Computational Economics.
  • Handle: RePEc:sce:scecf4:96
    as

    Download full text from publisher

    File URL: http://repec.org/sce2004/up.29098.1077378236.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Oswald, Andrew J, 1997. "Happiness and Economic Performance," Economic Journal, Royal Economic Society, vol. 107(445), pages 1815-1831, November.
    2. Walter H. Fisher, 2005. "Current Account Dynamics in a Small Open‐Economy Model of Status Seeking," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 262-282, May.
    3. Giacomo Corneo & Olivier Jeanne, 2001. "Status, the Distribution of Wealth, and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(2), pages 283-293, June.
    4. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
    5. Carroll, Christopher D & Overland, Jody & Weil, David N, 1997. "Comparison Utility in a Growth Model," Journal of Economic Growth, Springer, vol. 2(4), pages 339-367, December.
    6. Rauscher, Michael, 1997. "Protestant Ethic, Status Seeking, and Economic Growth," Thuenen-Series of Applied Economic Theory 09, University of Rostock, Institute of Economics.
    7. Gene M. Grossman (ed.), 1996. "Economic Growth," Books, Edward Elgar Publishing, volume 0, number 553.
    8. Matsuyama, Kiminori, 1990. "Residential investment and the current account," Journal of International Economics, Elsevier, vol. 28(1-2), pages 137-153, February.
    9. Fisher Walter H., 2004. "Status Preference, Wealth and Dynamics in the Open Economy," German Economic Review, De Gruyter, vol. 5(3), pages 335-355, August.
    10. Fisher, Walter H., 1995. "An optimizing analysis of the effects of world interest disturbances on the open economy term structure of interest rates," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 105-126, February.
    11. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, December.
    12. Eicher, Theo S. & Turnovsky, Stephen J., 2001. "Transitional dynamics in a two-sector non-scale growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 85-113, January.
    13. Harbaugh, Richmond, 1996. "Falling behind the Joneses: relative consumption and the growth-savings paradox," Economics Letters, Elsevier, vol. 53(3), pages 297-304, December.
    14. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    15. Mansoorian, Arman, 1998. "Habits and durability in consumption, and the dynamics of the current account," Journal of International Economics, Elsevier, vol. 44(1), pages 69-82, February.
    16. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
    17. 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.
    18. Corneo, Giacomo & Jeanne, Olivier, 2001. " Status, the Distribution of Wealth, and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(2), pages 283-293, June.
    19. 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.
    20. Walter Fisher & Franz Hof, 2000. "Relative consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 72(3), pages 241-262, October.
    21. Frank, Robert H, 1997. "The Frame of Reference as a Public Good," Economic Journal, Royal Economic Society, vol. 107(445), pages 1832-1847, November.
    22. Fisher, Walter H & Terrell, Dek, 2000. "World Interest Shocks, Capital, and the Current Account," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 261-274, May.
    23. Arman Mansoorian & Simon Neaime, 2000. "Habits and Durability in Consumption, and the Effects of Tariff Protection," Open Economies Review, Springer, vol. 11(3), pages 195-204, July.
    24. Corneo, Giacomo & Jeanne, Olivier, 2001. "On relative-wealth effects and long-run growth," Research in Economics, Elsevier, vol. 55(4), pages 349-358, December.
    25. 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.
    26. Easterlin, Richard A., 1974. "Does Economic Growth Improve the Human Lot? Some Empirical Evidence," MPRA Paper 111773, University Library of Munich, Germany.
    27. 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.
    28. Michael Rauscher, 1997. "Conspicuous consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 66(1), pages 35-42, February.
    29. Walter H. Fisher & Dek Terrell, 2000. "World Interest Shocks, Capital, and the Current Account," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 261-274, May.
    30. Fisher, Walter H. & Hof, Franz X., 2000. "Relative Consumption and Endogenous Labour Supply in the Ramsey Model: Do Status-Conscious People Work Too Much?," Economics Series 85, Institute for Advanced Studies.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fisher, Walter H. & Hof, Franz X., 2005. "Status seeking in the small open economy," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 209-232, June.
    2. Fisher, Walter H. & Heijdra, Ben J., 2009. "Keeping up with the ageing Joneses," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 53-64, January.
    3. Walter H. Fisher, 2008. "Imports, Status Preference, and Foreign Borrowing," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 1-20, February.
    4. Wirl Franz & Novak Andreas J. & Hof Franz X., 2008. "Happiness due to Consumption and its Increases, Wealth and Status," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 12(4), pages 1-34, December.
    5. Walter Fisher & F. Hof, 2008. "The quest for status and endogenous labor supply: the relative wealth framework," Journal of Economics, Springer, vol. 93(2), pages 109-144, March.
    6. Liu, Wen-Fang & Turnovsky, Stephen J., 2005. "Consumption externalities, production externalities, and long-run macroeconomic efficiency," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1097-1129, June.
    7. Hof, Franz X. & Prettner, Klaus, 2019. "The quest for status and R&D-based growth," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 290-307.
    8. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    9. 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.
    10. Turnovsky, Stephen J. & Monteiro, Goncalo, 2007. "Consumption externalities, production externalities, and efficient capital accumulation under time non-separable preferences," European Economic Review, Elsevier, vol. 51(2), pages 479-504, February.
    11. Duernecker, Georg, 2007. "Growth Effects of Consumption Jealousy in a Two-Sector Model," Economics Series 201, Institute for Advanced Studies.
    12. Walter H. Fisher, 2005. "Current Account Dynamics in a Small Open‐Economy Model of Status Seeking," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 262-282, May.
    13. Walter H. Fisher, 2004. "Status Preference, Wealth and Dynamics in the Open Economy," German Economic Review, Verein für Socialpolitik, vol. 5(3), pages 335-355, August.
    14. Holger Strulik, 2015. "How Status Concerns Can Make Us Rich and Happy," Economica, London School of Economics and Political Science, vol. 82, pages 1217-1240, December.
    15. Hof, Franz X. & Prettner, Klaus, 2019. "Relative consumption, relative wealth, and long-run growth: When and why is the standard analysis prone to erroneous conclusions?," Hohenheim Discussion Papers in Business, Economics and Social Sciences 12-2019, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    16. Nguyen-Van, Phu & Pham, Thi Kim Cuong, 2013. "Endogenous fiscal policies, environmental quality, and status-seeking behavior," Ecological Economics, Elsevier, vol. 88(C), pages 32-40.
    17. Pham, Thi Kim Cuong, 2005. "Economic growth and status-seeking through personal wealth," European Journal of Political Economy, Elsevier, vol. 21(2), pages 407-427, June.
    18. Sanou Issa, 2021. "Jealousy and Wealth Inequality: The Cases of Heterogeneous Preferences and Elastic Labor Supply," Working Papers hal-03408115, HAL.
    19. Fisher, Walter H., 2002. "Investment and Current Account Dynamics in an Open Economy Status Seeking Framework," Economics Series 110, Institute for Advanced Studies.
    20. Christopher Tsoukis & Frédéric Tournemaine, 2013. "Status In A Canonical Macro Model: Labour Supply, Growth And Inequality," Manchester School, University of Manchester, vol. 81(s2), pages 65-92, October.

    More about this item

    Keywords

    Status Seeking; Durable Consumption; Relative Consumption;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf4:96. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/sceeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.