Solution to “the Kuznets Riddle”

Authors

  • Anatolii Havryliak Department of Business Economics and Investment, Lviv Polytechnic National University, Lviv, Ukraine.
  • Ihor Skvortsov Department of Business Economics and Investment,Lviv Polytechnic National University, Lviv, Ukraine.
  • Oksana Musiiovska Department of Business Economics and Investment, Lviv Polytechnic National University, Lviv, Ukraine.
  • Olena Zahoretska Department of Business Economics and Investment, Lviv Polytechnic National University, Lviv, Ukraine,
Abstract:

S. Kuznets's study that the average propensity to consume is a constant value were nexpected because they denied one of the basic provisions of the Keynesian theory. This fact was called "the riddle of Kuznets".  F. Modigliani and M. Friedman, using the hypothesis of the life cycle and the concept of constant income, proposed two options that explain its solution. But models should not explain, but give a method of solution. The most controversial is the indicator of autonomous consumption. In the first model, it grows, and in the second it goes to zero. Creation of a method of simulation of consumption functions based on common methodological principles for the consideration of micro and macroeconomic systems. Having constructed a model that objectively describes the activity of a separate enterprise, the primary and primary links of the macroeconomic system, we can explore the whole system. At the exit of the economic system we consider two functions of the offer - cost and cost-price, and one demand. These functions form two types of Keynesian cross, which define two points: break-even and economic power (equilibrium In a three-dimensional space a chain of transformations is considered: profit, investments, fixed assets, growth of depreciation (constant costs) and output. The condition for the formation of a "proportional development economy" - the average propensity to consume should remain unchanged, which is achieved when the marginal values of the multipliers of fixed costs and return on assets are constant. Such periods were explored by S. Kuznets.

Download for Free

Sign up for free to access the full text

Already have an account?login

similar resources

My Resources

Save resource for easier access later

Save to my library Already added to my library

{@ msg_add @}


Journal title

volume 14  issue 1

pages  141- 149

publication date 2021-03-01

By following a journal you will be notified via email when a new issue of this journal is published.

Hosted on Doprax cloud platform doprax.com

copyright © 2015-2023