Spirit of Capitalism and Conspicuous Consumption with Social Status in a Neoclassical Growth Trade Model

Abstract

This study deals with dynamic interactions among social status, conspicuous consumption, spirit of capitalism, global growth, trade patterns, and inequalities in income and wealth between countries. The paper constructs a multi-country growth model with endogenous physical capital, wealth accumulation and social status. The modelling of social status is influenced by the ideas related to economic growth and social status in the literature of economic growth. This study analyzes the role of conspicuous consumption by assuming that social status is enhanced by more consumption and the role of the spirit of capitalism (of some goods) by assuming that social status is enhanced by more wealth. The global economic system consists of any number of countries and each country has one capital goods sector and one consumer goods sector. This study applies an alternative utility function proposed by Zhang to analyze household behavior. The countries differ in preferences, spirits of capitalisms, and productivities. We show that the dynamics of -country world economy is described by  differential equations. We simulate the motion of the model with three countries and carry out comparative dynamic analysis with regard to some parameters.