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

  • WALTER H. FISHER

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

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 96.

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Date of creation: 11 Aug 2004
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Handle: RePEc:sce:scecf4:96
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  18. Corneo, Giacomo & Jeanne, Olivier, 2001. "On relative-wealth effects and long-run growth," Research in Economics, Elsevier, vol. 55(4), pages 349-358, December.
  19. 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.
  20. 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.
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