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Productive Consumption and Growth in Developing Countries
Author(s) -
Steger Thomas M.
Publication year - 2000
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00101
Subject(s) - economics , consumption (sociology) , endogenous growth theory , overlapping generations model , autonomous consumption , growth model , poverty trap , capital (architecture) , microeconomics , capital accumulation , human capital , poverty , macroeconomics , market economy , economic growth , debt , history , social science , archaeology , sociology
Productive consumption enables the satisfaction of current needs and increases the productive potential of labor. The productive‐consumption hypothesis is of fundamental interest because it modifies the “harsh” intertemporal consumption tradeoff traditionally assumed. The incorporation of the productive‐ consumption hypothesis into a simple endogenous growth model reveals the following implications: (i) the possibility of a poverty‐trap; (ii) the rule of optimal consumption turns into a modified Keynes–Ramsey rule; (iii) the (effective) IES is based on, inter alia , the technological opportunities to enhance human capital due to productive consumption; (iv) a rising saving rate; and (v) transitional dynamics to an asymptotic balanced‐growth path.