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The volatility of consumption and output with increasing industrialization

Author

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  • Gomme, Paul
  • Zhao, Yan

Abstract

Consumption is more volatile than output in developing countries while it is less volatile than output in developed economies. This paper shows that the relatively large home sector in developing economies contributes to this difference, and the driving force for this difference is technology. Thus this paper suggests that volatile market consumption is almost inevitable at the start of industrialization, when the technology level in the market sector is just above that of the home sector.

Suggested Citation

  • Gomme, Paul & Zhao, Yan, 2010. "The volatility of consumption and output with increasing industrialization," MPRA Paper 33721, University Library of Munich, Germany, revised 17 Aug 2011.
  • Handle: RePEc:pra:mprapa:33721
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    File URL: https://mpra.ub.uni-muenchen.de/33721/1/MPRA_paper_33721.pdf
    File Function: original version
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    References listed on IDEAS

    as
    1. Aguiar, Mark & Gopinath, Gita, 2007. "Emerging Market Business Cycles: The Cycle is the Trend," Scholarly Articles 11988098, Harvard University Department of Economics.
    2. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115, pages 69-102.
    3. Paul Gomme & Finn E. Kydland & Peter Rupert, 2001. "Home Production Meets Time to Build," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1115-1131, October.
    4. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-775, August.
    5. Gomme, Paul & Rupert, Peter, 2007. "Theory, measurement and calibration of macroeconomic models," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 460-497, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. repec:eee:inecon:v:108:y:2017:i:c:p:67-81 is not listed on IDEAS
    2. Kuan-Jen Chen & Angus C. Chu & Ching-Chong Lai, 2014. "Home Production and Small Open Economy Business Cycles," IEAS Working Paper : academic research 14-A011, Institute of Economics, Academia Sinica, Taipei, Taiwan.

    More about this item

    Keywords

    Consumption volatility; Industralization;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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