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The volatility of consumption and output with increasing industrialization

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  • Gomme, Paul
  • Zhao, Yan

Abstract

Consumption is more volatile than output in developing countries while it is less volatile than output in developed economies. This paper shows that the relatively large home sector in developing economies contributes to this difference, and the driving force for this difference is technology. Thus this paper suggests that volatile market consumption is almost inevitable at the start of industrialization, when the technology level in the market sector is just above that of the home sector.

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File URL: http://mpra.ub.uni-muenchen.de/33721/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33721.

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Date of creation: 16 Oct 2010
Date of revision: 17 Aug 2011
Handle: RePEc:pra:mprapa:33721

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Keywords: Consumption volatility; Industralization;

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  1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August.
  2. Gomme, Paul & Rupert, Peter, 2007. "Theory, measurement and calibration of macroeconomic models," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 460-497, March.
  3. Mark Aguiar & Gita Gopinath, 2004. "Emerging market business cycles: the cycle is the trend," Working Papers 04-4, Federal Reserve Bank of Boston.
  4. Paul Gomme & Finn E. Kydland & Peter Rupert, 2001. "Home Production Meets Time to Build," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1115-1131, October.
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