IDEAS home Printed from
   My bibliography  Save this article

Non-homothetic preferences and growth


  • Cristina Echevarria


We observe that countries at low levels of income invest at lower rates than those at higher levels of income. This paper explains this fact as a consequence of Engel's law, i.e. that there is an inverse relation between expenditure and its proportion spent on food. It introduces non-homothetic preferences based on Engel's law in a simple Solow model. These preferences imply rates of net investment that increase with the level of income as we approach the steady state. Increasing investment rates imply a positive correlation between growth rates and the level of income, at low levels of income, rather than an inverse relation, as the usual Solow model implies. The existence of a positive correlation between income growth rates and income levels, at low levels of income in the presence of this type of preference, has already been shown in a previous paper for a closed economy. The purpose of this paper is to show that this positive correlation persists when we introduce trade into the model.

Suggested Citation

  • Cristina Echevarria, 2001. "Non-homothetic preferences and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(2), pages 151-171.
  • Handle: RePEc:taf:jitecd:v:9:y:2001:i:2:p:151-171
    DOI: 10.1080/09638190050028153

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. E. Cristina Echevarria, 2008. "International trade and the sectoral composition of production," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 192-206, January.
    2. Trevor Tombe, 2010. "The Missing Food Problem: How Low Agricultural Imports Contribute to International Income and Productivity Differences," Working Papers tecipa-416, University of Toronto, Department of Economics.

    More about this item


    Engel's Law; Growth; Investment Rates;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jitecd:v:9:y:2001:i:2:p:151-171. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.