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A Note on GDP-versus Consumption-Maximizing Growth
CERDI/CNRS, Universite Clermont-Auvergne, Clermont-Ferrand, France
- 1 CERDI/CNRS, Universite Clermont-Auvergne, Clermont-Ferrand, France
Theoretical Economics Letters·Volume 10 (2020)·Pages 909–925·Published 31 July 2020·DOI10.4236/tel.2020.104054
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Abstract
Sparked by Baumol’s revenue-versus profit-maximizing models of the firm, this note shows that if a nation seeks GDP-maximizing growth with capital expansion as driving force, the model could work only under the assumption that the consumers’ aversion to under-consumption, an unavoidable consequence of over-investment, remains constant. Otherwise, it has to decelerate growth and ultimately converges to the neoclassical growth model with consumption optimality. The empirical evidence, especially the sustainability of the Chinese model, is examined to explore the extent to which the model captures the real world.
KeywordsGDP-Maximizing GrowthAversion to Under-ConsumptionTransition between Steady StatesSustainability
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