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

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  • André Lorentz
  • Tommaso Ciarli
  • Maria Savona
  • Marco Valente

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. Copyright Springer-Verlag Berlin Heidelberg 2016

Suggested Citation

  • André Lorentz & Tommaso Ciarli & Maria Savona & Marco Valente, 2016. "The effect of demand-driven structural transformations on growth and technological change," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 219-246, March.
    • Handle: RePEc:spr:joevec:v:26:y:2016:i:1:p:219-246
    DOI: 10.1007/s00191-015-0409-5
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    More about this item

    Keywords

    Consumption; Structural change; Income distribution; Technological change; Growth; O41; L16; C63; O14;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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