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The Rise of Mass Consumption Societies

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  • Kiminori Matsuyama

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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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers with number 23.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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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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. Nancy L Stokey, 1986. "Learning-by-Doing and the Introduction of New Goods," Discussion Papers 699, Northwestern University, Center for Mathematical Studies in Economics and Management Science, revised May 1987.
  2. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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.
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