Genuine Saving and Conspicuous Consumption
Thomas Aronsson (thomas.aronsson@econ.umu.se) and
Olof Johansson-Stenman (olof.johansson@economics.gu.se)
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Thomas Aronsson: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden
No 900, Umeå Economic Studies from Umeå University, Department of Economics
Abstract:
Much evidence suggests that people are concerned with their relative consumption, i.e., their consumption in relation to the consumption of others. Yet, the social costs of conspicuous consumption have so far played little (or no) role in savings-based indicators of sustainable development. The present paper examines the implications of such behavior for measures of sustainable development by deriving analogues to genuine saving when people are concerned with their relative consumption. Unless the resource allocation is a social optimum, an indicator of positional externalities must be added to genuine saving to arrive at the proper measure of intertemporal welfare change. A numerical example based on U.S. and Swedish data suggests that conventional measures of genuine saving (which do not reflect conspicuous consumption) are likely to largely overestimate this welfare change. We also show how relative consumption concerns affect the way public investment ought to be reflected in genuine saving.
Keywords: Welfare change; investment; saving; relative consumption (search for similar items in EconPapers)
JEL-codes: D03 D60 D62 E21 H21 I31 Q56 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-11-20
New Economics Papers: this item is included in nep-ltv and nep-mac
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Related works:
Working Paper: Genuine Saving and Conspicuous Consumption (2016)
Working Paper: Genuine Saving and Conspicuous Consumption (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0900
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