On the sustainability of maximizing GDP Growth

He, Yong (2018): On the sustainability of maximizing GDP Growth.

Abstract

Sparked by Baumol’s revenue- versus profit-maximizing models of the firm, this paper using a growth model 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, and the effects of under-consumption are not accumulative. Otherwise, it has to decelerate growth and ultimately converges to the neoclassical growth model with consumption optimality. The empirical evidence on growth models of ex-Soviet Union, China and Eastern Asia are examined to explore the extent to which the model captures the real world.

• Item Type: MPRA Paper
• Language: English
• Keywords: GDP-maximizing growth; under-consumption effects; transition between steady states; sustainability; Chinese model.
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E20 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O50 - General

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