Durable Consumption As A Status Good: A Study Of Neoclassical Cases
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
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Web page: http://comp-econ.org/|
More information through EDIRC
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.:
- Clark, Andrew E. & Oswald, Andrew J., 1996.
"Satisfaction and comparison income,"
Journal of Public Economics,
Elsevier, vol. 61(3), pages 359-381, September.
- 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.
- Gali, J., 1992. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice and Asset Prices," Papers 92-22, Columbia - Graduate School of Business.
- Christopher D. Carroll & Jody Overland & David N. Weil, 1997.
"Comparison Utility in a Growth Model,"
NBER Working Papers
6138, National Bureau of Economic Research, Inc.
- Oswald, Andrew, 1997.
"Happiness and Economic Performance,"
The Warwick Economics Research Paper Series (TWERPS)
478, University of Warwick, Department of Economics.
- 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.
- 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.
- Corneo, Giacomo & Jeanne, Olivier, 2001. " Status, the Distribution of Wealth, and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(2), pages 283-93, June.
- Christopher D. Carroll & Jody Overland & David N. Weil, 1995.
"Saving and growth with habit formation,"
Finance and Economics Discussion Series
95-42, Board of Governors of the Federal Reserve System (U.S.).
- Christopher D. Carroll & Jody Overland & David N. Weil, 2000. "Mathematica code for 'Saving and Growth with Habit Formation' and 'Comparison Utility in a Growth Model'," QM&RBC Codes 43, Quantitative Macroeconomics & Real Business Cycles.
- Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, June.
- Fisher, Walter H., 2001.
"Current Account Dynamics in a Small Open Economy Model of Status Seeking,"
107, Institute for Advanced Studies.
- 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, 05.
- Fisher, Walter H., 2001.
"Status Preference, Wealth, and Dynamics in the Open Economy,"
99, Institute for Advanced Studies.
- 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, 08.
- Matsuyama, Kiminori, 1990. "Residential investment and the current account," Journal of International Economics, Elsevier, vol. 28(1-2), pages 137-153, February.
- 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.
- 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.
- 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.
- Harbaugh, Richmond, 1996. "Falling behind the Joneses: relative consumption and the growth-savings paradox," Economics Letters, Elsevier, vol. 53(3), pages 297-304, December.
- Rauscher, Michael, 1997. "Protestant Ethic, Status Seeking, and Economic Growth," Thuenen-Series of Applied Economic Theory 09, University of Rostock, Institute of Economics.
- Corneo, Giacomo & Jeanne, Olivier, 2001. "On relative-wealth effects and long-run growth," Research in Economics, Elsevier, vol. 55(4), pages 349-358, December.
- 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.
- 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.
- Fisher, Walter H & Terrell, Dek, 2000. "World Interest Shocks, Capital, and the Current Account," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 261-74, May.
- Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
- Frank, Robert H, 1997. "The Frame of Reference as a Public Good," Economic Journal, Royal Economic Society, vol. 107(445), pages 1832-47, November.
- Walter Fisher & Franz Hof, 2000. "Relative consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 72(3), pages 241-262, October.
- Michael Rauscher, 1997. "Conspicuous consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 66(1), pages 35-42, February.
- 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.
When requesting a correction, please mention this item's handle: RePEc:sce:scecf4:96. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.