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The role of technology, organisation, and demand in growth and income distribution

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  • Tommaso Ciarli
  • Andre' Lorentz
  • Maria Savona
  • Marco Valente

Abstract

The paper proposes a model that explains cross-country growth divergences over time for different aspects of structural change. The model formalises the links between production technology, firm organisation (functional composition of employment) on the supply side and the endogenous evolution of income distribution and consumption patterns on the demand side. Wage distribution is the main channel between the organisation of firms and consumption patterns, and firm selection is the main trigger of investment in new capital, productivity gains and cumulative growth. The model is able to reproduce empirical stylised facts on growth and income inequality associated with different stages of growth. We use VARs to estimate the causal relations between the three aspects of structural change. We then analyse the effect of the parameters that define the structure of an economy --and the way in which this unfolds through time-- on growth and income distribution via numerical simulation. Product variety, differences in consumption preferences, organisational complexity and production technology determine whether the economy experiences a take-off or a stagnating growth, and the associated distribution of income.

Suggested Citation

  • Tommaso Ciarli & Andre' Lorentz & Maria Savona & Marco Valente, 2012. "The role of technology, organisation, and demand in growth and income distribution," LEM Papers Series 2012/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  • Handle: RePEc:ssa:lemwps:2012/06
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    Cited by:

    1. André Lorentz & Tommaso Ciarli & Maria Savona & Marco Valente, 2016. "The effect of demand-driven structural transformations on growth and technological change," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 219-246, March.
    2. Elisa Palagi & Mauro Napoletano & Andrea Roventini & Jean-Luc Gaffard, 2017. "Inequality, Redistributive Policies and Multiplier Dynamics in an Agent-based Model with Credit Rationing," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 3(3), pages 367-387, November.
    3. Giorgio Fagiolo & Andrea Roventini, 2017. "Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 20(1), pages 1-1.
    4. Safarzyńska, Karolina & van den Bergh, Jeroen C.J.M., 2017. "Integrated crisis-energy policy: Macro-evolutionary modelling of technology, finance and energy interactions," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 119-137.
    5. Saviotti, Pier Paolo & Pyka, Andreas, 2013. "From necessities to imaginary worlds: Structural change, product quality and economic development," Technological Forecasting and Social Change, Elsevier, vol. 80(8), pages 1499-1512.
    6. Fulvio Castellacci & Arne Fevolden, 2015. "Innovation and Liberalization in the European Defence Sector," Books, Edward Elgar Publishing, number 15941.

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    Keywords

    Structural change; growth; income distribution; consumption; technological change;

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