ON THE CONSUMPTION RATE IN THE LESS DEVELOPED COUNTRIES

The consumption rate (CR), defined as the ratio of consumption to\nnational income, tends to decrease with increases in income and, as a result,\nto assume negative growth rates. Yet, of 83 LDCs located in Africa, Asia and\nAmerica (Central and South), 24 averaged over the 1960-80 period positive\nCR growth rates. Given that they also averaged lower (saving plus taxes) and\ngovernment spending growth rates, a downsizing of public sector activity can\npossibly be inferred. The likely concomitant decline in taxes may account for\nthe positive CR growth rates. The latter also pointed to the possibility of a\n"catching-upH by these countries with the rest of the group. Statistical\nestimates provide evidence of a tendency for the consumption, government\nspending and investment rates to converge among the LDCs. The data also\nsuggest that, on average, the consumption and government spending rates will\ntend to decrease and the investment rate to increase.