Competitive Conspicuous Consumption, Household Saving and Income inequality

Walther Herbert ()
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Walther Herbert: Department of Economics, Vienna University of Economics & B.A.

Working Papers from Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness

Abstract: An intertemporal decision model is presented in which subjects save less for retirement than the permanent income hypothesis predicts, signaling optimistic income prospects (and therefore high latent productivity) to possible partners in productive exchanges. Competitive conspicuous consumption (CCC), as it is called, is a self-defeating strategy, if followed by subjects simultaneously. Egalitarian policies (which have to be distinguished from pure welfare policies) tend to lower excess consumption. The CCC-hypothesis justifies a cross-sectional Keynesian consumption function with declining marginal propensities to consume. It is argued that the cultural context is highly relevant to the scope and importance of CCC.

JEL-codes: D9 E2 (search for similar items in EconPapers)
Date: 2004-09
New Economics Papers: this item is included in nep-pke
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