Consumption aspirations in dirty and clean goods and economic growth |
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Institution: | 1. Department of Economics, Tamkang University, No. 151, Yingzhuan Rd., Danshui Dist., New Taipei City, 25137, Taiwan;2. Department of International Business, No. 1, Sec. 1, Syuecheng Rd., Dashu District, Kaohsiung City, 84001, Taiwan;3. Department of Economics, Soochow University, 56 Kuei-Yang Street, Section 1, Taipei, 100, Taiwan;4. Institute of Economics, Academia Sinica, 128 Academic Road, Section 2, Taipei, 115, Taiwan;1. Bangor University, UK;2. University of Durham, UK;3. ESCA School of Management, Morocco;4. Alliant International University, USA;1. School of Economics and Management, Beihang University, Beijing, 100191, China;2. Institutes of Science and Development, Chinese Academy of Sciences, Beijing, 100190, China;3. School of Public Policy and Management, University of Chinese Academy of Science, Beijing, 100049, China |
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Abstract: | This paper builds a two-sector, two-factor environmental model in which agents optimally choose the clean and dirty goods in order to display their social status. In contrast to the conventional notion, we show that greater social aspirations in consumption regardless of either clean or dirty goods have an ambiguous impact on growth, depending on whether the production of conspicuous goods is relatively labor- or capital-intensive, whether the production of conspicuous goods generates more or fewer emissions, and whether labor supply is or is not responsive to social status seeking. By connecting two conflicting aspects of consumer preference involving social aspirations and environmental concerns, our analysis offers a novel explanation for the environmental Kuznets curve and a theoretical support for the empirical possibility of a negative employment-growth relationship and the so-called Green New Deal. Our welfare analysis shows that social comparisons in consumption may increase, rather than decrease, social welfare. The Pigovian tax may only be socially sub-optimal in the two-sector economy because it is unable to completely correct the distortion caused by consumption externalities. |
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Keywords: | Conspicuous consumption Clean and dirty goods Economic growth Pollution O40 Q20 |
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