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Productive Consumption in a Two-Sector Model of Economic Development

In: Creative Complex Systems

Author

Listed:
  • Ichiroh Daitoh

    (Keio University)

  • Kazuo Nishimura

    (RIEB, Kobe University)

Abstract

In low-income countries, labor productivity crucially depends on per capita consumption that contributes to good nutrition, health, and education. A higher level of per capita consumption improves each worker’s labor productivity. This concept of productive consumption was first formulated in the aggregate growth model by Steger (J Econ Dyn Control (2002) 26:1053–1068) and analyzed using numerical simulations. In this chapter, we investigate the stabilityStability of the labor-efficiency model of productive consumption by extending Steger’s model to a two-sector modelTwo-sector model. We find that a steady state uniquely exists and is saddle-point stable, providing theoretical support for Steger’s simulation results.

Suggested Citation

  • Ichiroh Daitoh & Kazuo Nishimura, 2021. "Productive Consumption in a Two-Sector Model of Economic Development," Creative Economy, in: Kazuo Nishimura & Masatoshi Murase & Kazuyoshi Yoshimura (ed.), Creative Complex Systems, chapter 0, pages 101-111, Springer.
    • Handle: RePEc:spr:crechp:978-981-16-4457-3_7
    DOI: 10.1007/978-981-16-4457-3_7
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