Relative Consumption and Saving

Alexis Direr ()

No 1056, Econometric Society World Congress 2000 Contributed Papers from Econometric Society

Abstract: We analyze in a two-period model the effect of relative consumption on saving by assuming that people care about their ordinal rank in the consumption distribution at each date. We outline some general properties of the model and then completely solve a simple version. We show that a rise in consumption inequalities implies a negative impact on saving.

Date: 2000-08-01
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