Productive Consumption, the Intertemporal Consumption Trade-Off and Growth

Productive consumption enables the satisfaction of current needs and simultaneously increases the productive potential of labour. 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 fundamental possibilities for modelling 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 labour. Both possibilities are analysed within the frame of simple endogenous growth models