Productive consumption, the intertemporal consumption trade-off and growth. (Q5958250)

Productive consumption enables the satisfaction of current needs and simultaneously increases the productive potential of labor. From the perspective of growth theory, the productive-consumption hypothesis is of fundamental interest because it modifies the harsh intertemporal consumption trade-off traditionally assumed. Two basic possibilities for modeling the productive-consumption hypothesis are distinguished: First, productive consumption is considered as enhancing the stock of human capital. Second, productive consumption is interpreted as increasing the efficiency of labor. Both possibilities are analyzed within the frame of simple endogenous growth models.