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The authors incorporate Keeping-Up-with-the-Joneses (KUJ) preferences into the Blanchard-Yaari (BY) framework and develop, using an AK technology, a model of balanced growth. In this paper, they investigate status preference, demographic, and pension policy shocks. They find that a higher degree of KUJ lowers economic growth, while, in contrast, a decrease in the fertility and mortality rates increase it. In the second part of the paper they extend the model by incorporating a Pay-As-You-Go (PAYG) pension system with a statutory retirement date.
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