DURABLE CONSUMPTION AS A STATUS GOOD: A STUDY OF NEOCLASSICAL CASES

employment, we calculate an instantaneous consumption function c = c (a, μ, φ) from
(A5a), which possesses the same partial derivatives stated above in (Ala).

The equilibrium dynamics of the fixed employment model then equals:

_4     .

φ = (l + β + δ) φ — μ,

(A6a)

a = c (a, μ, φ) — δa,

(A6b)

μ = μ[β — f '(к)]

(A6c)

к = f (к) — c(a,μ, φ~).

(A6d)

Letting φ = à = μ = к = 0, the long-run equilibrium equals

U [(ι + δ)α, _s (l)] + ^{u [(l+} ,^δra^{,s (l)] g,(l)}
(l + δ)a

,   _           _ч -`

= (β + δ)φ,

(A7a)

f ' (^a) = β

(A7b)

f (^a) = δa,

(A7c)

where c = δa and μ = (l + β + δ) φ. Linearizing (A6a)-(A6d) about the steady-state
equilibrium described by (A7a)-(A7c), we obtain the following matrix differential equation:

z = Jz =

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