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Growth and Keeping up with the Joneses

Ron Wendner

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the impact of the desire to keep up with the Joneses (KUJ) on economic growth and optimal tax policy in a continuous time overlapping generations model with AK technology and gradual retirement. Due to the desire to KUJ, the propensity to consume out of total wealth rises (declines), and the balanced growth rate declines (increases) when the households' individual total (accumulated \emph{and} human) wealths are increasing (decreasing) with age. The rate of retirement determines whether or not a household's total wealth is increasing with age. If total wealth is increasing/decreasing with age, an optimal allocation is decentralized by a lump sum tax system that is progressive/regressive in age. The desire to KUJ strengthens the intergenerational regressivity (progressivity) of the optimal tax system.

Keywords: Keeping up with the Joneses; AK growth; overlapping generations; gradual retirement; optimal taxation (search for similar items in EconPapers)
JEL-codes: D91 E21 O40 (search for similar items in EconPapers)
Date: 2009-10-19
New Economics Papers: this item is included in nep-age, nep-dge, nep-fdg and nep-hap
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: GROWTH AND KEEPING UP WITH THE JONESES (2010) Downloads
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