Search

The objective of this paper is to evaluate the role of the manufacturing sector in the development process based on two laws of Kaldor. The first law states that the higher the growth of the manufacturing output, the more significant is the growth rate of the economy's product as a whole. The second law, known as the Kaldor–Verdoorn law, establishes a deterministic relation between the growth of manufacturing productivity and manufacturing output growth. This paper begins showing stylized facts of the production and exports of manufactured goods to show that these remain related to the income level of countries in recent years. Thereafter, a theoretical reflection on the importance of manufacturing in the process of economic development is performed, associating it to the manufacturing exports and to the exchange rate regime. Then, the paper performs a Kaldorian model systematization to assess the importance of manufacturing and its exports on the economic development. Econometric tests are performed based on a dynamic panel data for a sample of 63 middle and high-income countries, excluding major exporters of fuels for the period between 1990 and 2011, to analyze whether there is any difference in growth dynamics between these two groups. Estimates attest the occurrence of the two Kaldor laws, demonstrating that output growth in the manufacturing sector is essential to increasing economic growth and productivity, particularly in middle-income economies. The results also confirm that manufacturing exports are relevant to the development process and that the exchange rate contributes to this process in middle-income countries. [ABSTRACT FROM AUTHOR]

Abstract: This paper contributes to the debate on the relationship between human capital, institutions, and economic growth. The paper first develops a micro-foundation model linking institutions to human capital. The advantage of our modeling strategy is that the human capital accumulation function is derived from an endogenous process. The theoretical model shows that improvements in the quality of institutions foster human capital accumulation, decrease income inequality and change the historical development path. The paper uses cross-country panel data from 1965 to 2005 to test some of the model''s propositions and finds that deep structures or structural institutions – which are very persistent and rooted on the historical development path of an economy – affect long-term economic performance, while political institutions are uncorrelated with productivity and long-term economic growth. The empirical estimates also show that growth of physical and human capital – instead of levels – determines long-run economic growth. [Copyright &y& Elsevier]

Abstract: This paper develops a two-sector model that considers Baumol''s service paradox. The paper simultaneously incorporates two ideas about technological progress in the model: (1) the consumption of services contributes to human capital accumulation and (2) the production of manufacturing leads to technological progress due to learning-by-doing. Accordingly, productivity growth in both services and manufacturing is endogenously determined. We show that initially, a shift in the employment share toward the services sector decreases the per capita real GDP growth rate, but at some point in time, the shift begins to increase the growth rate. Therefore, we observe an endogenous phase switch from a phase where the employment shift toward services depresses the economy to another where the employment shift promotes the economy. [Copyright &y& Elsevier]

Abstract: This paper investigates how the employment shift from manufacturing toward service sectors affects the rate of economic growth when services play their role both in intermediate and in final demand. Our model includes as a special case both Baumol’s [Baumol, W.J., 1967. Macroeconomics of unbalanced growth: the anatomy of urban crisis. American Economic Review 57 (3), 415–426] model, in which services are produced only for final consumption, and Oulton’s [Oulton, N., 2001. Must the growth rate decline? Baumol’s unbalanced growth revisited. Oxford Economic Papers 53 (4), 605–627] model, in which services are entirely devoted to intermediate demand. We show that, given that the growth rate of productivity in the service sector is lower than that in the manufacturing sector, both the employment share in manufacturing and the rate of economic growth will decline in the long run irrespective of the size of the elasticity of substitution between labor and service input. [Copyright &y& Elsevier]

Abstract: In this paper we pursue the work started jointly with R. Goodwin in the 1990s. Goodwin’s later work went very much in the direction of modelling Schumpeter’s insights into structural and technological transformations in the context of disaggregated models while allowing for non-full employment outcomes and macroeconomic cyclical patterns to develop alongside these transformations. In a series of papers we have followed up this work for closed and open economies, drawing out in particular the implications of structural transformations for macro-distributional dynamics and effective demand problems. This has been analysed for advanced and catching-up economies and their interdependencies on the global stage. We shall review our modelling efforts in this respect and trace these back to Goodwin’s life-long preoccupation with synthesising disaggregated (linear) modelling with macro-dynamic analysis. [Copyright &y& Elsevier]

Pervasive credit constraints have been seen as major sources of slow growth in developing economies. This paper clarifies a mechanism through which an inefficient financial system can reduce productivity growth. Using a two-sector model, second, we examine the implications for employment and the distribution of income. Both classical and Keynesian versions of the model are considered; saving decisions are central in the classical version while firms’ investment and pricing decisions take center stage in the Keynesian version. We find that, although boosting the asymptotic rate of growth, a relaxation of credit constraints may reduce the share of the formal sector, increase inequality and underemployment, and have little or no effect on the medium-run rate of growth. [ABSTRACT FROM AUTHOR]

The paper discusses the relationship between industrial development and structural change in the Age of globalization. It sets within the same theoretical framework the fact that both the sectoral concentration of manufacturing activities and the internal structure of the whole economy do change in the course of industrial development, and shows that the speed of such transformations depends upon the time at which industrial development has taken place. In particular, for late industrializing countries the intra- and inter-sectoral structural adjustments have been significantly faster as compared to those experienced by nations that built their manufacturing base in earlier times. These results have strong implications for the current debate on early deindustrialization. [ABSTRACT FROM AUTHOR]

Mexico, as other Latin American countries, undertook far-reaching economic reforms in the 1980s and 1990s in a wide array of areas. Over the past three decades, the Mexican economy has gone through a structural change and experienced a successful insertion into global markets. Yet productivity growth has been modest, leading to low and volatile economic growth. To examine the weak association between structural change and productivity growth, two features are studied: inter- and intra-industry transformations, and the contribution of production factors to value added growth. The paper shows that despite a significant reallocation of hours worked across industries, its aggregate impact has been hindered by the prevalence of flows from sectors with high labor productivity growth towards those with lower or declining productivity growth. In addition, highly qualified production factors (both labor and capital) have not showed a significant contribution to value added growth. [ABSTRACT FROM AUTHOR]

This paper builds a two-country, two-sector (manufacturing and agriculture), semi-endogenous growth model and investigates the relationship between trade patterns and the growth rate of per capita real consumption. Under free trade, if the home country produces both goods and the foreign country specializes in agriculture, then the per capita growth rates of the home country and foreign country are equalized. By contrast, if the home country specializes in manufacturing and the foreign country specializes in agriculture, then the per capita growth rate of the home country is higher than that of the foreign country. [ABSTRACT FROM AUTHOR]

This paper focuses on the role of the production structure in shaping output shares, wage bargaining and the dynamics of the real exchange rate in a Neo-Kaleckian macroeconomic model. While changes in the rate of capital utilization ensure the short-run equilibrium, in the medium run the real exchange rate must adjust to stabilize the labor market and the external sector. Interestingly, these variables define a trilemma in which it is not possible for workers to have their desired wage share, for firms to have their desired profit share in output and for the economy to have a stable deficit in current account to GDP ratio at the same time. Structural change allows for a way out of the trilemma as it makes possible a higher wage share for a given profit share with external equilibrium. The corollary is that distribution and high employment cannot be sustained solely by conventional fiscal and monetary policies: they also require industrial and technological policies that redefine the structural parameters of the system, as a form of reconciling conflicting claims with external equilibrium. [ABSTRACT FROM AUTHOR]

This paper examines the transition dynamics caused by technological breakthroughs. Our results show that technological breakthroughs cause a productivity slowdown and a drop in the stock prices of existing firms; these findings are consistent with observations in the 1970s. We explain how technological breakthroughs cause these phenomena. The emergence of a new technology creates new business opportunities, which reduces existing firms’ profits, thus causing their stock prices to drop. This decline in existing firms’ profits discourages R&D-intensive firms from entering the sector; this decreases aggregate R&D activity, and thus the growth rate of productivity declines. [ABSTRACT FROM AUTHOR]

Abstract: In this paper we study a model for endogenous growth based on technology diffusion across European countries with respect to the major foreign partners. To that aim we disentangle the dynamics of such a problem by considering the single contribution to growth of each country, arising from every other individual country and for every strategic variable of the model. Among those, business services play a leading role for the link supported between innovations and production. Moreover technology growth itself fosters the off-shoring process of business services. Our calculations are an outcome of a program we settled for a continuous time estimation which is, in its nature, suitable for the study of the dynamic systems. [Copyright &y& Elsevier]

Abstract: Taking as reference the long-wave theory, in this paper we try to give a fully endogenous explanation of the factors triggering the technological revolutions – one of the main causes of a new long upswing. We extend the traditional macro and meso economic analysis by presenting a behavioural model in which innovation, entrepreneurship and radical uncertainty play a crucial role in determining the dynamics of the system. Our theoretical analysis is enriched and formalized in a multi-sectoral model, whose consistency is verified through numerical simulations. [Copyright &y& Elsevier]

Abstract: This paper explores macroeconomic policies that can sustain structural change in China and India. A two-sector open-economy model with endogenous productivity growth, demand driven output and income distribution as an important determinant of economic activity is calibrated to a 2000 SAM for China and a 1999/2000 SAM for India. Short-run analysis concerns temporary equilibria for output, productivity and employment growth rates in the formal sector. In the long-run, the model allows for multiple equilibria which can describe cases of (a) underdevelopment and structural heterogeneity or (b) sustained growth and development. Several simulation exercises are conducted. Specifically, we consider how changes in investment, wages, labor productivity trend and a depreciation of currency affect the macroeconomy and job creation in the formal sector. [Copyright &y& Elsevier]

Abstract: Recent empirical studies have found a robust correlation between competitive exchange rates and economic growth in developing economies. This paper presents (i) a formal model to help explain these findings and (ii) econometric evidence on the relation between investment and the real exchange rate. The model emphasizes the existence of (hidden) unemployment as a source of endogenous growth, even under constant returns to scale. Growth promoting policies, however, affect the external balance, and two instruments are needed in order to achieve targets for both the growth rate and the trade balance. The real exchange rate can serve as one of those instruments. The implications of the model for the relation between real exchange rates and the rate of capital accumulation find support in our econometric analysis. [Copyright &y& Elsevier]

Abstract: This paper develops a dynamic theory that accounts for the evolution of trade policy, underlying internal class conflicts, and output growth performance. Analysis of political responses to the distributional effects of international trade reveals that economies with a comparative advantage in manufacturing may reach a developed stage through the ebb and flow of protectionism. This nonmonotonic evolution of trade policy is consistent with the historical experience of Western Europe over the last few centuries. [Copyright &y& Elsevier]

Abstract: Vulnerability to reduction of natural capital depends on defensive substitution possibilities that, in turn, are affected by the availability of other productive factors. However in several developing countries asset distribution tends to be highly skewed. Taking into account these elements, this paper proposes a model considering an economy polarized into two classes (the rich and the poor) and characterized by the following stylized facts: income and productivity of the rural poor is highly dependent on natural resources; labour remuneration in rural sector represents the opportunity cost for wage labour; the rich can partially substitute natural capital with physical capital and wage labour. In this context, agents differ for feed back mechanisms and interactions between their choices of production and environmental dynamics. Moreover environmental depletion may trigger economic transition, but the structural change is likely to result regressive. [Copyright &y& Elsevier]

Abstract: This paper presents the results of an effort to dissect 19th century economic growth in the Netherlands into two principal long run components: the domain of the trend and the domain of long waves. Spectral and cross-spectral analysis is used to identify Kondratieffs in volume series. It appears that the long term pattern of development is composed of an inverse S-shaped trend and a Kondratieff wave that is superimposed upon it. Contrary to the British case, long waves in Dutch volume series appear to run contrary to the corresponding long waves in price series. This finding is at variance with the received view on long waves. This typical result is explained by so-called ‘Keynes effect’ in combination with the characteristics of a small open economy that has to dance to the tune of the dominant British economy. [Copyright &y& Elsevier]

Abstract: This paper looks at the convergence clubs literature from a Schumpeterian perspective, and it follows the idea that cross-country differences in the ability to innovate and to imitate foreign technologies determine the existence of clustering, polarization and convergence clubs. The study investigates the characteristics of different technology clubs and the growth trajectories that they have followed over time. The cross-country empirical analysis first explores the existence of multiple regimes in the data by means of cluster analysis techniques. It then estimates a technology-gap growth equation in a dynamic panel model specification. The empirical results identify three distinct technology clubs, and show that these are characterized by remarkably different technological characteristics and growth behavior. [Copyright &y& Elsevier]

Existing North–South growth models generally ignore the possibility that the South becomes an innovating high-wage country. The present paper presents an analytically tractable North–South growth model in which the North innovates all the time, while the South is at first engaged in imitation and potentially starts to innovate too, later on. Three interesting results emerge from the analysis. First, a perfect foresight growth equilibrium may fail to exist. Second, there may be global indeterminacy in that both convergence to the steady state of the regime with imitation in the South and switching to the regime with innovation in the South represent perfect foresight equilibria. Third, technology policies in the South may have hysteresis effects: a temporary policy may lead the South permanently from imitation-driven to innovation-driven growth. [Copyright &y& Elsevier]