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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 inprovement 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 inquality is needed for the economy to take off; too much equality means that the economy stagmates in a poverty trap. With too much inequality, the ecnomoy'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 Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1289.

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Date of creation: Sep 1999
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Handle: RePEc:nwu:cmsems:1289

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  1. 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.
  2. 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.
  3. 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.
  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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