Growth by saturation

When you compare rich and poor economies, you notice that many things differ between them One of them is that rich countries enjoy a much larger diversity of goods. It is not just that they carry more broads categories of goods, there are also more variations of a given good. For example, rich countries may have more car types and each model is sold with many more variations than in poor countries. Explaining this could be interesting.

This may be the motivation of Kozo Kunimune who builds a growth model with three essentially characteristics: there is constant growth in factor productivity, there is a ranking of goods with respect to the utility they provide, and consumers have a saturation point for each good. This implies that once they are saturated with a good, any "excess" production capacity can be dedicated to another good. As there is a strict ordering, goods are satisfied in succession and the number of goods defines the level of development. Also, the time needed to satisfy a new good decreases if the growth rate is constant, a feature that sounds empirically correct. But of course, there is no evidence whatsoever that we have such "lexicographic cum Leontieff" preferences. The model also violates elementary principles of Economics, such as local non-satiation. Not a particularly useful model.

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