Productive Consumption and Growth in Developing Countries

Thomas Steger

Review of Development Economics, 2000, vol. 4, issue 3, 365-375

Abstract: 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.

Date: 2000
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https://doi.org/10.1111/1467-9361.00101

Related works:
Working Paper: Productive Consumption and Growth in Developing Countries (1997)
Working Paper: Productive Consumption and Growth in Developing Countries (1997)
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