2008/08 LEM Working Paper Series

Structural Change of Production and Consumption: A Micro to Macro Approach to Economic Growth and Income Distribution

Tommaso Ciarli, Andre Lorentz, Maria Savona, Marco Valente
Structural change; consumption; earnings distribution; growth.

  JEL Classifications
O12, J31, L23, D11, O41

The paper aims to analyse the effect of initial structural conditions in the organisation and composition of production and in demand patterns, via changes in wages distribution, as affecting economic growth and income inequality. We develop an evolutionary model with agent-based micro-foundations and analyse the link between structural change and growth taking into account (i) firm-level organisational differences and technological changes, (ii) their impact on the structure of earnings and income of workers-consumers, and (iii) the consequent changes in consumption. The model articulates the links between production and organisation structures on the supply side, and the endogenous evolution of income distribution on the demand side. Simplied scenarios are identified via numerical simulations, in which patterns of aggregate growth are obtained as an emerging property of different structures of firms' organisation and production, functional composition of employment, income distribution and patterns of consumption.

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