By Reto Foellmi

This ebook deals a singular viewpoint that permits to include altering intake and construction constitution into versions of monetary progress. ranging from the empirical remark that source of revenue and intake constitution are heavily comparable, it develops a tractable theoretical framework which permits to investigate macroeconomic versions in keeping with those empirical evidence. therefore, primary macroeconomic phenomena are higher understood: the explanations in the back of long-run development, structural switch, and the effect of inequality on concepts and development.

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Additional resources for Consumption Structure and Macroeconomics: Structural Change and the Relationship Between Inequality and Growth

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1) = E and the non-negativity constraints c(j) > 0 for all j . The optimality conditions require ^v{c{i)) = ^[s^ — (s — c{i))'^] has been normalized such that v{0) — 0. 1). Since only goods in the interval i G [0, N] can be consumed in positive amounts the consumer's objective can be written as u{{c}) = /Q i ''^[s^ ~ (* ~ c{i))'^]di + J^ i~^^[s'^ — s'^]di. To prevent divergence of the first integral we must have 7 < 1. ) the second integral is zero and does not diverge. 2 Static Equilibrium 37 that the above constraints and the first order conditions c{j)[j-'{s-c{j))-Xp(j)] = 0 Vi r^(s-c(i))-Ap(j) < 0 Vj.

The Il-curve is defined by the equation wF = n ( ^ , 6) 46 3. 11). 11'). Fig. 1. The Equilibrium of the Growth Rate g and Waiting Time 6 The shape of the U-curve Consider first the (^, 6) space. When the consumer does not buy all available goods, n < N^ innovators have a waiting time 6 > 0 until they can sell their product. The slope of the Il-curve is given by dg/d6 = —Ils/Ilg. A higher 6 decreases profits so II^ < 0 (where fix denotes the partial derivative of IT with respect to x). This simply results from discounting: the longer one has to wait for a given profit fiow, the lower is the present value of this fiow.

Matsuyama (1992)). The Stone-Geary is also common in (two-goods-)models where the individuals decide how much to consume and to bequest. Examples include Galor and Moav (2002) and Mani (2001). •'^^Eswaran and Kotwal (1993) and Laitner (2000) use lexicographic preferences in a two goods model (agricultural and manufacturing good). 26 2. e. t. p{j) > e Vj, and that expenditures are positive, Ei > 0. We distinguish whether v{c) is bounded from above or not. The individual index i is omitted in what follows.

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