Luxury and Wealth Accumulation

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: This paper develops a model of luxury goods by incorporating weakly non-separable, recursive preferences. In a two-good framework, a quasi-luxury is de ned as a good whose marginal rate of substitution is increasing in wealth. Under certain conditions, it is identical to a luxury good. Consumers wait for quasi-luxuries more (less) patiently than for quasi-necessities when they expect to be happier (unhappier) in the future. The preference for quasi-luxuries promotes optimal wealth accumulation and hence growth. In a two-country economy, the less patient country with stronger quasi-luxury preferences can be wealthier than the more patient country.

Keywords: WEALTH; WEALTH DISTRIBUTION; PREFERENCES (search for similar items in EconPapers)
JEL-codes: D91 E21 F34 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0528

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