A Test of the Relative Income Hypothesis

Dynamic Game Model of Endogenous Growth with Consumption Externalities

“…Therefore, we find the same condition for the ordinal relationship between growth rates to be destroyed as in the case that agents adopt linear feedback strategies, (23), even if they adopt nonlinear ones.…”

“…Since the first multiplying term is positive by Assumption 2.1, the growth rate in the feedback Nash equilibrium becomes higher than that in the open-loop Nash equilibrium if and only if (23) holds.…”

“…Since N > 1, (23) states that the growth rate in the feedback Nash equilibrium is higher than that in the open-loop Nash equilibrium if preferences exhibit admiration to other agents' consumption. This result shows that, although the growth rate in the feedback Nash equilibrium is lower than that in the open-loop Nash equilibrium as generally argued, the presence of strong admiration reverses the conclusion.…”

Patterns of Spending Behavior and the Relative Position in the Income Distribution: Some Empirical Evidence

“…Solving for first-order conditions and denoting the elasticity of R(X) with respect to X as E RX, where E RX equals to Xf(X)R(X), both Frank (1985) and Kosicki (1987b) stated that E RX decreases in R(X) for any f(X) likely to be observed in practice. Kosicki further proved that if E RX is decreasing in R(x), it also decreases in income rank G(M).…”

“…Extending Frank (1985)'s work, Kosicki (1987bKosicki ( , 1990) presented a utility maximization framework in which concern for the relative standing in the current consumption hierarchy was integrated with a permanent income framework. The results revealed that permanent income as well as income rank, are important determinants of saving rates.…”