Keeping up with the ageing Joneses

Walter Fisher and Ben Heijdra ()

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 1, 53-64

Abstract: In this paper we consider the implications of relative consumption externalities in the Blanchard-Yaari overlapping generations framework. Unlike most of the macroeconomic literature that studies this question, the differences between agents, and, thus, in their relative position, persist in equilibrium. We show in our fixed employment model that consumption externalities lower consumption and the capital stock in long-run equilibrium, a result in sharp contrast to the recent findings of Liu and Turnovsky [2005. Consumption externalities, production externalities, and the accumulation of capital. Journal of Public Economics 89, 1097-1129]. In addition, we solve for the intertemporal path of the economy to investigate its response to demographic shocks, specifically, to permanent changes in the birth and death rates.

Keywords: Relative; consumption; Overlapping; generations; Demographic; shocks (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (30)

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Working Paper: Keeping up with the Ageing Joneses (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:33:y:2009:i:1:p:53-64

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