Economic growth, business cycles and products variety: exploring the role of demand satiety

Authored by Benoit Desmarchelier, Faridah Djellal, Faiz Gallouj

Date Published: 2017

DOI: 10.1007/s00191-017-0498-4

Sponsors: No sponsors listed

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Model Documentation: Other Narrative Pseudocode Mathematical description

Model Code URLs: Model code not found

Abstract

The paper presents a model of economic growth based on a population of heterogeneous and interacting agents. This model succeeds to generate - in a single framework - GDP growth and cycles as well as product life cycles. Contrary to the existing literature, we find that an increasing variety of consumer goods is not a necessary condition for sustaining the economic growth when consumers are subject to satiation. Indeed, intensive creative-destruction - that is an intensive process of sectors births and deaths - appears to be a more powerful growth engine. We also find that changing consumers' satiety thresholds is likely to affect the nature of the correlation between the cyclical components of macroeconomic time series.

Tags

Agent-based modeling Innovation Economic growth Model Policies Creative destruction Product variety Demand satiety Market-structure Creation