Growth or Stagnation: Economic Consequences of Status Preference

22 Pages Posted: 1 May 2006  

Yoshiyasu Ono

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

Date Written: January 2001

Abstract

Using a dynamic optimization model with status preference this paper shows that depending on the object of people's status preference an economy exhibits a completely opposite performance; permanent growth or persistent stagnation. If the object is a producible asset (viz. real capital), new employment is created and extra production is invested in capital, which generates permanent growth even under decreasing returns to capital. If it is an unproducible asset (viz. money), commodity demand is not created and deflation occurs. Full employment is never reached under nominal wage sluggishness although prices and wages continue to adjust.

Keywords: Status Preference, Long-Run Growth, Persistent Unemployment.

JEL Classification: E12, E24, O41

Suggested Citation

Ono, Yoshiyasu, Growth or Stagnation: Economic Consequences of Status Preference (January 2001). Osaka University Institute of Social and Economic Research Discussion Paper No. 524. Available at SSRN: https://ssrn.com/abstract=899043 or http://dx.doi.org/10.2139/ssrn.899043

Yoshiyasu Ono (Contact Author)

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

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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