EconPapers    
Economics at your fingertips  
 

Do positional preferences for wealth and consumption cause inter-temporal distortions?

Ron Wendner ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper derives necessary and sufficient conditions under which positional preferences do not induce inter-temporal distortions. When labor supply is exogenous, positional preferences for consumption have been shown to be non-distortionary for a class of models. However, it has not been explored whether the same holds when households also exhibit positional preferences for wealth. The analysis identifies a restricted homogeneity-property which, when not satisfied, induces positional preferences to be distortionary, despite inelastic labor supply. Without positional preferences for wealth, a constant marginal rate of substitution-property is necessary and sufficient for a consumption positionality to be non-distortionary. Once a household also has positional preferences for wealth in addition, the consumption positionality almost always becomes distortionary, as the implied effects of the positional concerns induce opposing effects on a household's saving behavior. Under a constant marginal rates of substitution-property, these opposing effects exactly offset each other.

Keywords: Status; keeping up with the Joneses; positional preferences; distortion; endogenous growth; $Ak$ model (search for similar items in EconPapers)
JEL-codes: D91 O40 (search for similar items in EconPapers)
Date: 2015-05-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/64086/1/MPRA_paper_64086.pdf original version (application/pdf)

Related works:
Working Paper: Do positional preferences for wealth and consumption cause inter-temporal distortions? (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:64086

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2020-03-29
Handle: RePEc:pra:mprapa:64086