Consumption, Wealth, Frugality, and Economic Growth

Zaifu Yang () and Rong Zhang ()
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Zaifu Yang: Department of Economics and Related Studies, University of York, UK
Rong Zhang: College of Economics and Business Administration, Chongqing University

Annals of Economics and Finance, 2024, vol. 25, issue 1, 31-61

Abstract: In this paper we provide a quantitative analysis of how wealth may affect economic growth. In the economy, the utility of every individual depends on both consumption and wealth. Exploring a class of specific utility functions in which wealth has a weakening effect on the marginal utility of consumption, we find a closed-form solution of steady-state consumption, capital stock, savings rate, and convergence rate and obtain several novel results of wealth effects on economic growth. We also demonstrate that the new models can be calibrated to fit well with empirical observation.

Keywords: Economic growth; Wealth effects; Savings rate; Convergence rate (search for similar items in EconPapers)
JEL-codes: C61 O40 O41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2024:v:25:i:1:yangzhang

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