Standard-of-Living Aspirations and Economic Cycles

David de la Croix

No 2000008, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: Past experiences and social forces have been incorporated into tastes in order to analyze various microeconomic issues. We use these extended preferences to model the making of standard-of-living aspirations and study their effect on macroeconomic variables. We concentrate first on consumption behavior when there is habit formation. Such behavior is in accordance with several empirical facts and has important policy implications. Secondly, long term issues are analyzed assuming that children become habituated to a standard-of-living whilst still with their parents. This introduces a powerful mechanism responsible for long-term oscillations. We investigate in the third part whether habits applied to wage formation explain key labor market stylized facts.

Keywords: Tastes; habit formation; cycles; fair wage; catching-up (search for similar items in EconPapers)
JEL-codes: E24 E32 O41 (search for similar items in EconPapers)
Pages: 24
Date: 2000-02-01
New Economics Papers: this item is included in nep-evo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Chapter: Standard-of-Living Aspirations and Economic Cycles* (2001)
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