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Comparison utility in a growth model. (English) Zbl 0926.91038

Summary: We examine the dynamics of two endogenous-growth models in which agents have comparison utility. In the inward-looking economy, individuals care about how their current consumption compares with their own past consumption. In the outward looking economy, they care about how their own consumption compares with other people’s consumption. In response to a negative shock to capital, saving and growth will temporarily fall in both of the models that we consider but will remain constant in a model with standard preferences. The decline will be smaller in the outward- than in the inward-looking case, but utility will be lower in the former case because of a negative externality.

MSC:

91B62 Economic growth models
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