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A model of economic growth with saturating demand

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  • Kunimune, Kozo

Abstract

This study presents a model of economic growth based on saturating demand, where the demand for a good has a certain maximum amount.\nIn this model, the economy grows not only by the improvement in production efficiency in each sector, but also by the migration of production factors (labor in this model) from demand-saturated sectors to the non-saturated sector.\nIt is assumed that the production of a brand-new good will begin after all the existing goods are demand-saturated. Hence, there are cycles where the production of a new good emerges followed by the demand saturation of that good.\nThe model then predicts that should the growth rate be stable and positive in the long run, the above-mentioned cycle must become shorter over time. If the length of cycles is constant over time, the growth rate eventually approaches zero because the number of goods produced grows.

Suggested Citation

  • Kunimune, Kozo, 2011. "A model of economic growth with saturating demand," IDE Discussion Papers 283, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper283
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    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=37889&item_no=1&attribute_id=22&file_no=1
    File Function: First version, 2011
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Growth by saturation
      by Economic Logician in Economic Logic on 2011-11-16 21:41:00

    More about this item

    Keywords

    Economic growth; Economic development; Demand Saturation;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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