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http://ssrn.com/abstract=1262339
 
 

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A Note on Economic Growth with Subsistence Consumption


Holger Strulik


University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences

September 2, 2008

Leibniz Universitat Hannover Discussion Paper No. 405

Abstract:     
It is well known that the performance of simple models of economic growth improves substantially through the introduction of subsistence consumption. How to compute subsistence needs, however, is a difficult and controversially discussed issue. Here, I reconsider the linear (Ak) growth model with subsistence consumption and show that the evolution of savings rates and economic growth rates over time is independent from the size of subsistence needs. The model is thus more general and less subject to arbitrariness than it might have been thought initially. Quantitatively, it is shown that, although there is no degree of freedom to manipulate transitional dynamics, the model approximates the historical evolution of savings rates and growth rates reasonably well.

Number of Pages in PDF File: 11

Keywords: economic growth, saving, subsistence needs

JEL Classification: O11, O41, D90

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Date posted: September 3, 2008  

Suggested Citation

Strulik, Holger, A Note on Economic Growth with Subsistence Consumption (September 2, 2008). Leibniz Universitat Hannover Discussion Paper No. 405. Available at SSRN: http://ssrn.com/abstract=1262339 or http://dx.doi.org/10.2139/ssrn.1262339

Contact Information

Holger Strulik (Contact Author)
University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences ( email )
Germany
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