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Time, Quality and Growth

Author

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  • Alcalá, Francisco

    (Departamentos y Servicios::Departamentos de la UMU::Fundamentos del Análisis Económico)

Abstract

Consumption requires time. Also, higher-quality goods provide more utility per unit of time, though at a higher monetary cost. Since time is limited, higher income is decreasingly spent augmenting the quantity of consumption and increasingly spent upgrading its quality. After analyzing these consumer quantity/quality choices, the paper investigates its implications for growth. As a country develops, quality growth becomes increasingly important as a component of GDP growth. Furthermore, technical progress is increasingly quality-biased. Lower income inequality as well as progressive consumption taxes raise the scale of output while reducing average quality. This is positive for growth at early stages of development but may be negative at later stages. Results are broadly consistent with evidence on the composition of GDP growth, trade patterns of vertical specialization across countries, and the non-linearity of the impact of inequality on growth.

Suggested Citation

  • Alcalá, Francisco, 2009. "Time, Quality and Growth," UMUFAE Economics Working Papers 4811, DIGITUM. Universidad de Murcia.
  • Handle: RePEc:mur:wpaper:4811
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    References listed on IDEAS

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    More about this item

    Keywords

    Time allocation; Product quality; Growth; Inequality; Progressive consumption taxes;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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