Hae S Kim
The purpose of this paper is to assess the effect of consumption (consumer spending) on economic growth, based on 222 countries/ territories in the world, while the effect of other variables that are also assumed to affect economic growth is statistically controlled. The four factors (patterns) of economic growth identified are as follows:
• Factor 1: Consumption-driven economy
• Factor 2: Savings-based
• Factor 3: Oil-resource based
• Factor 4: Government-spending
Empirical evidence shows the predominance of the consumption-driven economy in affecting economic growth across the world, whether developing or developed. Eight variables were found to be significantly loaded in the pattern of the consumption driven economy: consumption, globalization, economic freedom, knowledge economy, global competitiveness, corruption, foreign direct investment, and economic growth. This means the consumption driven economy affects economic growth in multiple ways.
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