https://www.jonasgathen.com/tag/directed-technical-change/Directed Technical ChangeWowchemy (https://wowchemy.com)en-usWed, 19 Aug 2026 00:00:00 +0000https://www.jonasgathen.com/media/icon_huc6f9c9fa7bd27774758f204aa2e2b7d2_484676_512x512_fill_lanczos_center_3.pnghttps://www.jonasgathen.com/tag/directed-technical-change/https://www.jonasgathen.com/project/growth-demand-inequality/Wed, 19 Aug 2026 00:00:00 +0000https://www.jonasgathen.com/project/growth-demand-inequality/<p>How important is domestic demand in driving and directing growth over the course of development? And given that demand for different products varies strongly over the income distribution, how biased is demand-driven growth towards the rich? We study these questions quantitatively in the context of India’s economic development since the 1980s. Leveraging household consumption data, we show that cross-sectional Engel curves predict future changes in product demand. Using this ’Engel demand shifter’ as instrument and linking consumption to production data, we quantify how demand drives productivity growth and structural change. Linking the empirical results to a tractable multi-industry endogenous growth model, we show that domestic demand drove around 30% of India’s growth since the 1980s. However, growth is strongly biased towards relative luxury products, leading the rich to experience 25% higher real consumption growth. Redistribution can offset part of the pro-rich growth bias by directing technical change towards products the poor consume more.</p>