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Effective Demand and Quantity Constrained Growth: A Simple Two-Sector Disequilibrium Approach

Ogawa, Shogo (2019): Effective Demand and Quantity Constrained Growth: A Simple Two-Sector Disequilibrium Approach.

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Abstract

In this study, we construct a simple disequilibrium growth model to explore the dynamic property of effective demand. This study's main concern is the effect of the quantity constraint: How do the quantities of consumption and investment goods demand and the productive capacity affect capital accumulation? To answer this, we build a two-sector growth model with quantity constraints. One interesting result is that consumption goods demand enhances capital accumulation when the capital is sufficiently accumulated but impedes it when the capital is insufficient. The latter case is shown as a shrinking path by graphical analysis and a numerical experiment.

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