The effect of demand-driven structural transformations on growth and technological change

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Lorentz, André, Ciarli, Tommaso, Savona, Maria and Valente, Marco (2016) The effect of demand-driven structural transformations on growth and technological change. Journal of Evolutionary Economics, 26 (1). pp. 219-246. ISSN 0936-9937

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Abstract

The paper analyses the effect of the dynamics of consumption preferences on the dynamics of macro–economic growth. We endogenously derive micro– dynamics of consumption behavior 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 macro–economic growth. We find, first, that higher heterogeneity in consumption preferences amplifies and accelerates market dynamics, leading to a swift shift from a Malthusian to a Kaldorian growth pattern. Second, consumption smoothing mainly affects the timing of such a take–off. Inertia in consumption delays the occurrence of a Kaldorian engine for growth.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: H Social Sciences > HD Industries. Land use. Labour > HD0072 Economic development. Development economics. Economic growth
Depositing User: Tommaso Ciarli
Date Deposited: 22 Oct 2015 11:57
Last Modified: 10 Aug 2016 15:54
URI: http://srodev.sussex.ac.uk/id/eprint/57269

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