Difference or Ratio: Implication of Status Preference on Stagnation

25 Pages Posted: 12 Oct 2012 Last revised: 12 Feb 2014

See all articles by Yoshiyasu Ono

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER)

Katsunori Yamada

Kindai University, Faculty of Economics; Osaka University - Institute of Social and Economic Research

Date Written: January 31, 2014

Abstract

We consider a dynamic macroeconomic model of households that regard relative affluence as social status. The measure of relative affluence can be the ratio to, or the difference from, the social average. The two specifications lead to quite different results: under the ratio specification full employment is necessarily realized, whereas under the difference specification there is a case where a persistent shortage of aggregate demand arises. Affluence comparison experiments provide empirical indications that the difference specification is far more persuasive than the ratio specification. Therefore, persistent stagnation may well occur.

Keywords: status, stagnation, unemployment

JEL Classification: C91, E12, E24

Suggested Citation

Ono, Yoshiyasu and Yamada, Katsunori, Difference or Ratio: Implication of Status Preference on Stagnation (January 31, 2014). ISER Discussion Paper No. 856. Available at SSRN: https://ssrn.com/abstract=2160121 or http://dx.doi.org/10.2139/ssrn.2160121

Yoshiyasu Ono (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Katsunori Yamada

Kindai University, Faculty of Economics ( email )

Higashi-Osaka City, Osaka 577-8502
Japan

HOME PAGE: http://www.eonet.ne.jp/~kyamada/

Osaka University - Institute of Social and Economic Research ( email )

6-1, Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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