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Secular Satiation

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  • Saint-Paul, Gilles

Abstract

Satiation of need is generally ignored by growth theory. I study a model where consumers may be satiated in any given good but new goods may be introduced. A social planner will never elect a trajectory with long-run satiation. Instead, he will introduce enough new goods to avoid such a situation. In contrast, the decentralized equilibrium may involve long run satiation. This, despite that the social costs of innovation are second order compared to their social benefits. Multiple equilibria may arise: depending on expectations, the economy may then converge to a satiated steady state or a non satiated one. In the latter equilibrium, capital and the number of varieties are larger than in the former, while consumption of each good is lower. This multiplicity comes from the following strategic complementary: when people expect more varieties to be introduced in the future, this raises their marginal utility of future consumption, inducing them to save more. In turn, higher savings reduces interest rates, which boosts the rate of innovation. When TFP grows exogenously and labor supply is endogenized, the satiated equilibrium generically survives. For some parametrer values, its growth rate is positive while labor supply declines over time to zero. Its growth rate is then lower than that of the non satiated equilibrium. Hence, the economy may either coordinate on a high leisure, low growth, satiated "leisure society" or a low leisure, high growth, non satiated "consumption society".

Suggested Citation

  • Saint-Paul, Gilles, 2017. "Secular Satiation," CEPR Discussion Papers 12132, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12132
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    References listed on IDEAS

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    1. Kiminori Matsuyama, 2002. "The Rise of Mass Consumption Societies," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1035-1070, October.
    2. Gallouj, Faiz & Weinstein, Olivier, 1997. "Innovation in services," Research Policy, Elsevier, vol. 26(4-5), pages 537-556, December.
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    4. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    5. Foellmi, Reto & Zweimüller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1317-1328, October.
    6. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
    7. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
    8. Robert J. Gordon, 2012. "Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds," NBER Working Papers 18315, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    consumer society; growth; innovation; Labor Supply; leisure society; multiple equilibra; new products; satiation; strategic complementarities;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E14 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Austrian; Evolutionary; Institutional
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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