Income redistribution, interdependent consumers’ preferences and aggregate consumption

Abstract

In the above discussion we have taken a particular view of the emulation process, its relation to the movement from one level of living to another level of living and the process of such a movement itself. One may disagree with some elements in this framework but this analysis suggests, nonetheless, that a number of factors are involved in determining the effect of income redistribution on aggregate consumption expenditure. The manner and the force of emulation, the number of consumers in various income groups, their nearness to another level, the extent to which they increase or decrease their savings or consumption as a result of income redistribution appear to be some of the important factors. Unless one has sufficient information on these factors it seems difficult to conclude one way or the other about the effect of income redistribution on aggregate consumption. It becomes still more difficult to come to a definite conclusion if we consider that the consumers desire not only a better standard of living but also larger financial reserves.