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The Rise of Mass Consumption Societies

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Kiminori Matsuyama

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Abstract

This paper develops a model to understand mechanisms behind the rise of mass consumption societies. The development process depicted in the model follows the Flying Geese pattern, in which a series of industries takes off one after another. As productivity improves in these industries, each consumer good becomes affordable to an increasingly large number of households, which constantly expand the range of goods they consume. This in turn generates larger markets for consumer goods, which leads to further improvement in productivity. In order for such two-way causality to generate virtuous cycles of productivity gains and expanding markets, income distribution should be neither too equal nor too unequal. Some income inequality is needed for the economy to take off; too much equality means that the economy stagnates in a poverty trap. With too much inequality, the economy's development stops prematurely. The rise of a mass consumption society is thus an essential element for sustainable development

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Development Economics Papers with number 23.

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Date of creation: Nov 2000
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Handle: RePEc:cep:stidep:23

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Related research
Keywords: Income distribution; earning-by-doing; endogenous technological changes; nonhomothetic preferences; demand complementarity; the domino effect; cooperative dynamical systems.;

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  1. Jovanovic, Boyan & Lach, Saul, 1989. "Entry, Exit, and Diffusion with Learning by Doing," American Economic Review, American Economic Association, vol. 79(4), pages 690-99, September. [Downloadable!] (restricted)
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  2. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August. [Downloadable!] (restricted)
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  3. Baland, Jean-Marie & Ray, Debraj, 1991. "Why does asset inequality affect unemployment? A study of the demand composition problem," Journal of Development Economics, Elsevier, vol. 35(1), pages 69-92, January. [Downloadable!] (restricted)
  4. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 537-64, August. [Downloadable!] (restricted)
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  1. Reto Foellmi und Josef Zweimüller, . "Inequality and Economic Growth - European Versus U.S. Experiences," IEW - Working Papers iewwp158, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  2. Ravn, Morten O. & Schmitt-Grohé, Stephanie & Uribe, Martín, 2005. "The Macroeconomics of Subsistence Points," CEPR Discussion Papers 4843, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Chung-Yi Tse, 2008. "Diffusion with variable production lead times," Journal of Economics, Springer, vol. 93(2), pages 177-202, March. [Downloadable!] (restricted)
  5. Yo Chul Choi & David Hummels & Chong Xiang, 2006. "Explaining Import Variety and Quality: The Role of the Income Distribution," NBER Working Papers 12531, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Reto Foellmi & Joseph Zweimüller, 2006. "Mass Consumption, Exclusion, and Unemployment," IEW - Working Papers iewwp296, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  7. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
  8. E. Bilancini & Simone D’Alessandro, 2006. "Functional Distribution, Land Ownership and Industrial Takeoff: The Role of Effective Demand," DEGIT Conference Papers c011_051, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
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  9. Shiro Kuwahara, 2006. "Luxury-based Growth," Economics Bulletin, Economics Bulletin, vol. 15(5), pages 1-13. [Downloadable!]
  10. Matthew J. Baker & Lisa M. George, 2009. "The Role of Television in Household Debt: Evidence from the 1950's," Hunter College Department of Economics Working Papers 427, Hunter College: Department of Economics. [Downloadable!]
  11. Hatipoglu, Ozan, 2008. "Patent, Inequality and Innovation-Driven Growth," MPRA Paper 7855, University Library of Munich, Germany. [Downloadable!]
  12. Zhu Wang, 2007. "Income distribution, market size and the evolution of industry," Payments System Research Working Paper PSR WP 04-01, Federal Reserve Bank of Kansas City.
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  13. Dilip Mookherjee & Debraj Ray, 2000. "Persistent Inequality," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-108, Boston University - Department of Economics, revised Oct 2002. [Downloadable!]
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  14. Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March. [Downloadable!]
  15. BEAUDRY, Paul & COLLARD, Fabrice, 2001. "The Employment-Productivity Tradeoff around the 1980s : A Case for Medium Run Theory," IDEI Working Papers 137, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003. [Downloadable!]
  16. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," NBER Working Papers 12475, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Jean-Louis Warnholz (QEH), . "Poverty Reduction for Profit? A Critical Examination of Business Opportunities at the Bottom of the Pyramid," QEH Working Papers qehwps160, Queen Elizabeth House, University of Oxford. [Downloadable!]
  18. Joseph K. Kaboski, 2009. "Education, Sectoral Composition and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 168-182, January. [Downloadable!] (restricted)
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  19. Foellmi, Reto & Zweimüller, Josef, 2002. "Structural Change and the Kaldor Facts of Economic Growth," CEPR Discussion Papers 3300, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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