A note on conspicuous leisure,animal spirits and endogenous cycles

This paper investigates general equilibrium effects of conspicuous leisure. It finds that leisure externalities reduce the degree of other market imperfections needed to generate indeterminacy or sunspot equilibria - endogneous cycles become empirically more plausible. Sunspot equilibria are possible with a downward-sloping labor demand schedule. The economic reasoning behind the result is that with conspicuous-externalities, labor is drawn more easily in and out of leisure to help fulfill agents expectations.Received: June 2003, Accepted: January 2004, JEL Classification: E32Mark Weder: I thank Paulo Brito (the Editor), Michael Burda and an anonymous referee for very helpful comments and suggestions. All remaining errors are my own. Support by the Deutsche Forschungsgemeinschaft in the form of a Heisenberg Fellowshipis gratefully acknowledged.