The Effect of Demand-Driven Structural Transformations on Growth and Technological Change

33 Pages Posted: 8 Mar 2016

See all articles by Andre Lorentz

Andre Lorentz

University of Strasbourg, BETA, CNRS

Tommaso Ciarli

SPRU, University of Sussex

Maria Savona

University of Sussex

Marco Valente

University of L'Aquila - Faculty of Economics

Date Written: January 21, 2015

Abstract

The paper analyses the effect of the dynamics of consumption preferences on the dynamics of macroeconomic growth. We endogenously derive microdynamics of consumption behaviour as a result of the increase in the number of income classes. The different degrees of inertia in the adjustment of consumption levels to income changes affect firm selection and the dynamics of market structure, which is ultimately responsible for different regimes of macroeconomic growth. We find, firstly, that higher heterogeneity in consumption preferences amplifies and accelerates market dynamics, leading to a swift shift from a Malthusian to a Kaldorian growth pattern. Secondly, consumption smoothing mainly affects the timing of such a takeoff. Inertia in consumption delays the occurrence of a Kaldorian engine for growth.

Keywords: consumption, structural change, income distribution, technological change, growth

JEL Classification: O41, L16, C63, O14

Suggested Citation

Lorentz, Andre and Ciarli, Tommaso and Savona, Maria and Valente, Marco, The Effect of Demand-Driven Structural Transformations on Growth and Technological Change (January 21, 2015). SWPS 2015-04. Available at SSRN: https://ssrn.com/abstract=2743189 or http://dx.doi.org/10.2139/ssrn.2743189

Andre Lorentz (Contact Author)

University of Strasbourg, BETA, CNRS ( email )

France

Tommaso Ciarli

SPRU, University of Sussex ( email )

Jubilee Building
University of Sussex
Falmer, Brighton, Sussex BN1 9SL
United Kingdom

Maria Savona

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

Marco Valente

University of L'Aquila - Faculty of Economics ( email )

Piazza del Santuario, 19
Roio Poggio, AQ, 67040
Italy

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