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dc.contributor.authorAlvarez-Cuadrado, Franciscoen_US
dc.contributor.authorvan Long, Ngoen_US
dc.description.abstractWe propose an overlapping generations economy where households care about relative consumption, the difference between their consumption and the consumption of their reference group. An individual's consumption is driven by the comparison of his lifetime income and the lifetime income of his reference group; hence the paper offers a permanent income version of the Duesenberry's relative income hypothesis. Across households the saving ratio increases with income while aggregate saving is independent of the income distribution. Positional concerns lead agents to over-consume, over-work and under-save. We propose a simple tax schedule that induces the competitive economy to achieve the efficient allocation.en_US
dc.publisherCenter for Economic Studies and Ifo Institute (CESifo) Munichen_US
dc.relation.ispartofseriesCESifo working paper 2361en_US
dc.subject.keywordRelative consumptionen_US
dc.subject.keywordrelative income hypothesisen_US
dc.subject.keywordpermanent incomeen_US
dc.subject.stwOptimale Besteuerungen_US
dc.titleA permanent income version of the relative income hypothesisen_US
dc.typeWorking Paperen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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