Direct preferences for wealth, the risk premium

Abstract
In this paper, we consider social status, the spirit of capitalism, "scal policies, and asset
pricing in a stochastic model of growth. With speci"c assumptions on the production technology, preferences, and stochastic shocks, we derive the explicit solutions to the growth rates of consumption and savings and equilibrium returns on all assets. We further demonstrate how "scal policies, the spirit of capitalism, and stochastic shocks affect growth, asset pricing, and welfare.

2002 Elsevier Science B.V. All rights reserved.

JEL classixcation: E0; G1; H0; O0
Keywords: Social status; The spirit of capitalism; Fiscal policies; Asset pricing; Stochastic
growth