Growth and the Ageing Joneses

Walter Henry Fisher () and Ben J. Heijdra ()

No 230, Economics Series from Institute for Advanced Studies

Abstract: We incorporate Keeping-up-with-the-Joneses (KUJ) preferences into the Blanchard-Yaari (BY) framework and develop, using an AK technology, a model of balanced growth. In this context we investigate status preference, demographic, and pension policy shocks. We find that a higher degree of KUJ lowers economic growth, while, in contrast, a decrease in the fertility and mortality rates increase it. In the second part of the paper we extend the model by incorporating a Pay-as-you-go (PAYG) pension system with a statutory retirement date. This introduces a life-cycle in human wealth earnings and implies that the growth rate is higher under PAYG. We also consider the implications of an increase in the retirement date under both defined benefit and defined contribution schemes.

Keywords: Relative consumption; OLG; Endogenous growth; Pension reform (search for similar items in EconPapers)
JEL-codes: D91 E21 H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dge and nep-mac
Date: 2008-11
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http://www.ihs.ac.at/publications/eco/es-230.pdf First version, 2008 (application/pdf)

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Working Paper: Growth and the Ageing Joneses (2008)
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