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Download Consumption Structure and Macroeconomics: Structural Change by Reto Foellmi PDF

By Reto Foellmi

This booklet bargains a unique point of view that enables to include altering intake and construction constitution into versions of monetary development. ranging from the empirical commentary that source of revenue and intake constitution are heavily comparable, it develops a tractable theoretical framework which permits to research macroeconomic types in keeping with those empirical proof. accordingly, crucial macroeconomic phenomena are larger understood: the explanations in the back of long-run development, structural swap, and the impression of inequality on thoughts and progress.

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Extra info for Consumption Structure and Macroeconomics: Structural Change and the Relationship Between Inequality and Growth

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See Appendix. • It is important to note that the utility function across agents at a given point in time does not exhibit a CRRA form. The reason is that poor and rich agents do not consume the same goods, hence they face a diflPerent price index. But this is not a problem for the steady state behavior. We need only that the indirect utility is CRRA from the viewpoint of a single agent, as stated in the Proposition, because this implies that all agents will save the same constant fraction of income in steady state.

The R-curve crosses the p-axis at PR = ^ \l -{- j^-gjzr[\ ^/ 1 < bs ^ ^ , even at g = 0 not all products can be produced, the share of products consumed x = ^ is then given by the equation 1 = ^ 1 — x~^ jr—h ^ j ^ " • d. For g sufficiently high, Rg > 0 and Rg > 0. Proof see Appendix. R e m a r k If bs < 1, the R—curve never hits the p—axis.

An important special case of hierarchic preferences are the lexicographic preferences. Preferences are lexicographic if a consumer strictly prefers to consume good k than a whole bundle of goods j where all j > k. Lexicographic preferences are an extreme version of the 0-1-hierarchie preferences: A given need must be absolutely satiated before the consumer moves to next in his hierarchy. Obviously, in such a case the consumer will always consume along the hierarchy no matter what their prices are.

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