Choosing to keep up with the Joneses and income inequality (Q607480)
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English | Choosing to keep up with the Joneses and income inequality |
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Choosing to keep up with the Joneses and income inequality (English)
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22 November 2010
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Consider an economy of heterogeneous agents. If an agent's utility depends on the consumption of another agent, then the agent is said to be in a rat race. This paper studies the equilibrium of such an economy, with the novel feature that an agent may elect to drop out of the rat race. The paper proves the existence of equilibrium, together with a partial characterization and a useful numerical example. Average consumption and average leisure are inversely related.
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leisure distribution
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rat race
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keeping up with the Joneses
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income inequality
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