Biographical note: Giuseppe Bertola is Professor of Economics at the University of Turin. Reto Foellmi is Assistant Professor of Economics at the University of Zurich. Josef Zweimüller is Professor of Economics at the University of Zurich.

We analyze a macroeconomic model of monopolistic competition in which consumers earn unequal incomes. When preferences are non-homothetic, the distribution of income affects equilibrium mark-ups and equilibrium product diversity

This book offers a novel perspective that allows to incorporate changing consumption and production structure into models of economic growth. Starting from the empirical observation that income and consumption structure are closely related, it develops a tractable theoretical framework which...