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Bounded learning by doing, inequality, and multi-sector growth: A middle-class perspective

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  • Alain Desdoigts
  • Fernando Jaramillo

Abstract

This study presents a multisector model of middle-class-led economic growth, whereby, on the one hand, the middle class plays a key role in determining technical progress, while, on the other hand, both its size and income share are the result of past economic growth. Learn- ing by doing, which is assumed to be sector-speci c, bounded from above, and constrained by a minimum scale restriction, is the primary source of productivity gains. The emphasis is then placed on the entire income distribution, which a¤ects the composition of demand -span of goods consumed- and in turn, the speed and the extent of the learning process in the set of goods produced. The model exhibits an inverted-U relationship between inequality and economic growth, which re ects the following trade-o¤: An economy cannot learn both quickly and simultaneously in a wide range of sectors. It is constrained in this respect by its income/skill distribution and the size of its labor force, with consequences on growth-enhancing strategies by means of income redistributions.

Suggested Citation

  • Alain Desdoigts & Fernando Jaramillo, 2018. "Bounded learning by doing, inequality, and multi-sector growth: A middle-class perspective," Working papers 4, Red Investigadores de Economía.
    • Handle: RePEc:rie:riecdt:4
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    3. Gilles Saint-Paul, 2023. "The educated class and the fragility of consumer society," PSE Working Papers halshs-04129252, HAL.

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    More about this item

    Keywords

    Learning by doing; Middle-class-led consumption; Inequality; Multi-sector growth; Income redistribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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