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Bounded Learning by Doing, Inequality, and Multi-Sector Growth: A Middle-Class Perspective

Author

Listed:
  • Alain Desdoigts

    (University of Paris 1)

  • Fernando Jaramillo

    (Universidad del Rosario)

Abstract

This paper develops a multi-sector model of middle-class-led economic growth, whereby (i) learning by doing interacts with scale economies and nonhomothetic preferences giving rise to endogenous growth, and (ii) the "middle class" label is an endogenous outcome of the model, depending on past economic growth. The emphasis is placed on the entire income distribution, which affects the composition of demand - range of goods consumed - and in turn, the speed and extent of the learning process in the range of goods produced. Learning is sector specific, bounded from above, and constrained by a minimum scale restriction. It starts with a switch from traditional to modern technologies, understood as structural change. A higher share in the purchasing power of the middle class expands the market size for modern goods, and generates more learning in non-mature modern technologies, contributing to productivity gains, and under certain conditions (e.g. a significant learning potential), to sustained growth. Eventually, we make the case for a strong middle class; that is, redistributive policies towards the middle class and the poor. (Copyright: Elsevier)

Suggested Citation

  • Alain Desdoigts & Fernando Jaramillo, 2020. "Bounded Learning by Doing, Inequality, and Multi-Sector Growth: A Middle-Class Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 198-219, April.
  • Handle: RePEc:red:issued:18-362
    DOI: 10.1016/j.red.2019.10.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Learning by doing; Middle-class-led consumption; Inequality; Multi-sector growth; Income redistribution;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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