Abstract
As was showed in the fourth chapter, the fundamental aspect of agents’ behaviour relates to self-preservation. Despite there are various options how to comprehend self-preservation in economics, we can generally understand it as expending a certain amount of resources in order to reproduce to the next period. This idea closely relates to a range of economic literature that is dedicated to subsistence consumption. The difference between using the term ‘reproduction’ instead of ‘subsistence’ is here rather semantical and it is not meant to be crucial for our further analysis. Nevertheless, in our sketchy understanding, reproduction more directly links to the dynamic processes, while subsistence has rather static connotations. This is potentiated by the fact that for most relevant articles it is common to consider subsistence consumption as constant. Nevertheless, we will use these terms throughout this book interchangeably with a preference to use the term ‘subsistence consumption’, following the practice of the field of study where this book is written.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Recall how Horkheimer (2012 [1949–1967]) referred to stagnation as destruction.
- 2.
Stone was the first who estimated the linear expenditure system.
- 3.
Operating with human and physical capital under one broad definition of capital stock can be seen already in Rebelo (1991). This definition of capital will be useful in the last chapter of this book.
- 4.
\( A=0.1,\kern0.5em \theta =3,\kern0.5em \rho =0.01,\kern0.5em \delta =0.02,\kern0.5em n=0.03,\kern0.5em \overline{c}=2 \), for more details see Steger (2000).
- 5.
For the proof see Strulik (2010:766).
- 6.
As was explained in the opening chapter, the coefficient of variation can be also used directly as a measure of economic inequality.
- 7.
If the agent does not meet the subsistence level and operates below, her utility from that time on equals zero.
- 8.
For further details including the proof of numerical estimation of the true value function see Zimmerman and Carter (2003).
- 9.
Bear on mind that the average endowment of the productive asset is 3.5.
References
Achury C, Hubar S, Koulovatianos C (2012) Saving rates and portfolio choice with subsistence consumption. Rev Econ Dyn 15(1):108–126
Azariadis C (1996) The economics of poverty traps, Part One: Complete markets. J Econ Growth 1:449–486
Barro RJ, Sala-i-Martín Y (1995) Economic growth. McGraw-Hill, New York
Christiano L (1989) Understanding Japan’s saving rate: the reconstruction hypothesis. Federal Reserve Minneapolis Quart Rev Spring:10–15
Deaton A (1991) Saving and liquidity constraints. Econometrica 59:1221–1248
Deaton A (1992) Understanding consumption. Oxford University Press, Oxford
Dercon S (1998) Wealth, risk and activity choice: cattle in Western Tanzania. J Dev Econ 55:1–42
Dynan KE, Skinner J, Zeldes S (2004) Do the rich save more? J Polit Econ 112:397–444
Easterly W (1994) Economic stagnation, fixed factors, and policy thresholds. J Monet Econ 33:525–557
Gandolfo G (2010) Economic dynamics. Springer
Geary RC (1950) A note on “A constant-utility index of the cost of living”. Rev Econ Stud 18(2):65–66
Horkheimer M (2012[1949–67]) Critique of instrumental reason. Verso, London
Jones R (1985) Report. Japan Economic Institute
King RG, Rebelo S (1993) Transitional dynamics and economic growth in the neoclassical model. Am Econ Rev 83:908–931
Loayza N, Schmidt-Hebbel K, Serven L (2000) What drives private saving across the world? Rev Econ Stat 82:165–181
Malloy CJ, Moskowitz TJ, Vissing-Jorgensen A (2009) Long-run stockholder consumption risk and asset returns. J Financ 64:2427–2480
Merton RC (1969) Lifetime portfolio selection under uncertainty: the continuous-time case. Rev Econ Stat 51:247–257
Merton RC (1971) Optimum consumption and portfolio rules in a continuous-time model. J Econ Theory 3:373–413
Nelson R (1956) A Theory of the low-level equilibrium trap in underdeveloped economies. Am Econ Rev 46(5):894–908
Ogaki M, Ostry JD, Reinhart CM (1996) Saving behaviour in low- and middle-income developing countries: a comparison. IMF Staff Pap 43(1):38–71
Rebelo S (1991) Long-run policy analysis and long run growth. J Polit Econ 99:500–521
Rebelo S (1992) Growth in open economies. Carn-Roch Conf Ser Public Policy 36:5–46
Rosenzweig MR, Binswanger HP (1993) Wealth, weather risk and the composition and profitability of agricultural investments. Econ J 103:56–78
Rosenzweig MR, Wolpin KI (1993) Credit market constraints, consumption smoothing, and the accumulation of durable production assets in low-income countries: investment in bullocks in India. J Polit Econ 101:223–244
Sarel M (1994) On the dynamics of economic growth. IMF Working Paper 138
Sharif M (1986) The concept and measurement of subsistence: a survey of the literature. World Dev 14:555–577
Shin YH, Koo JL, Roh KH (2018) An optimal consumption and investment problem with quadratic utility and subsistence consumption constraints: a dynamic programming approach. Math Model Anal 23(4):627–638
Steger T (2000) Economic growth with subsistence consumption. J Dev Econ 63:343–361
Stone R (1954) Linear expenditure systems and demand analysis: an application to the pattern of British demand. Econ J 64(255):511–527
Strulik H (2010) A note on economic growth with subsistence consumption. Macroecon Dyn 14(5):763–771
Wachter JA, Yogo M (2010) Why do household portfolio shares rise in wealth? Rev Financ Stud 23:3929–3965
Zimmerman FJ, Carter M (2003) Asset smoothing, consumption smoothing and the reproduction of inequality under risk and subsistence constraints. J Dev Econ 71(2):233–260
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2020 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Maialeh, R. (2020). Models of Subsistence Consumption. In: Dynamic Models and Inequality. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-46313-7_5
Download citation
DOI: https://doi.org/10.1007/978-3-030-46313-7_5
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-46312-0
Online ISBN: 978-3-030-46313-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)