The Effect of Consumption and Production Structure on Growth and Distribution. A Micro to Macro Model

Abstract

The paper offers a theoretical analysis of long-run economic growth as an outcome of structural changes. We model the microeconomic behaviour of firms in the final good and capital sectors, and the evolution of classes of workers/consumers. We carefully craft economic behaviour onto empirical evidence, and solve the model numerically. The results illustrate the microeconomic properties of the simulated growth patterns. In particular, we observe and explain the interactions between technological change, firm organization, income distribution, consumption behaviour and growth. We confirm the relevance and interdependence of these structural changes, and underline their microeconomic sources.

The complex interactions between economic growth and market concentration in a model of structural change

“…3 Here, we briefly discuss the main structure and dynamics of the model. In the following sections we highlight the aspects of the model that differ from Ciarli et al (2010), and on which the investigation in this paper depends.…”

“…The model is an extension of the model described in Ciarli et al (2010) and Ciarli et al (2012), where a detailed description can be found. 3 Here, we briefly discuss the main structure and dynamics of the model.…”

“…For a given level of output the amount of labour required depends on the productivity of the stock of capital vintages accumulated by the firm (A f (t − 1)), while we assume a fixed capital intensity (D f ). Complete determination of the output is illustrated in equations 1-4 in Ciarli et al (2012). Also, we assume no constraint on accessing capital and labour.…”

“…A national wage first is determined on the basis of a wage curve (Blanchflower and Oswald, 2006;Nijkamp and Poot, 2005), and then is updated if both labour productivity and consumer prices increase. Details of the whole process are explained in equations 33-35 in Ciarli et al (2010).…”

“…We refer to the relevant literature and argue for the need for a complexity approach to the study of structural change. In Section 3 we describe the model, focusing on the main aspects of interest in the context of this paper and on the modifications with respect to Ciarli et al (2010) and Ciarli et al (2012). In Section 4 we present and discuss the results.…”