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ResearchPaper
2019
Relative consumption, relative wealth, and long-run growth : when and why is the standard analysis prone to erroneous conclusions?
Relative consumption, relative wealth, and long-run growth : when and why is the standard analysis prone to erroneous conclusions?
Institute of Economics
Abstract (English)
We employ a novel approach for analyzing the effects of relative consumption and relative wealth preferences on both the decentralized and the socially optimal economic growth rates. In the pertinent literature these effects are usually assessed by examining the dependence of the growth rates on the two parameters of the instantaneous utility function that seem to measure the strength of the relative consumption and the relative wealth motive. We go beyond the sole consideration of parameters by revealing the fundamental factors that ultimately determine long-run growth. In doing so we identify widely used types of status preferences in which the traditional approach is prone to erroneous conclusions. For example, in one of these specifications the parameter that seems to determine the strength of the relative consumption motive actually also affects the strength of the relative wealth motive and the elasticity of intertemporal substitution.
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Hohenheim discussion papers in business, economics and social sciences; 2019,12
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Faculty of Business, Economics and Social Sciences
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Institute of Economics
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English
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330 Economics
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BibTeX
@techreport{Prettner2019,
url = {https://hohpublica.uni-hohenheim.de/handle/123456789/6456},
author = {Prettner, Klaus and Hof, Franz X.},
title = {Relative consumption, relative wealth, and long-run growth : when and why is the standard analysis prone to erroneous conclusions?},
year = {2019},
school = {Universität Hohenheim},
series = {Hohenheim discussion papers in business, economics and social sciences},
}