Cumulative causation in a structural economic dynamic approach to economic growth and uneven development

Abstract

The Structural Economic Dynamic approach is distinguished by its simultaneous approach to demand and supply sides of economic growth. However, the idea that growth itself can transform an economy, which became known in the literature as cumulative causation, cannot be properly studied by this framework because technological progress is treated in the same manner as in the traditional Neoclassical model, that is, it is exogenous. Besides, it is the only source of economy growth with no role played by demand in the pace of economic growth but only in the sectoral composition of the economy. Here we introduce Verdoon's Law in the Pasinetti's model of structural change thus making it able to study cumulative causation and thus rendering structural changes endogenous in this model. JEL Classification: O19, F12

Income distribution and economic growth

“…The structure of the economy, reflected by the share of saving and investment of each sector, also plays an important role in determining the type of growth regime. The importance of structural dynamics for economic growth has been emphasized by Pasinetti (1981Pasinetti ( , 1993), Araujo and Lima (2007), and Araujo (2013). By applying a structural dynamics point of view to the growth regime-formation issue, we can show that the current multi-sectoral Kaleckian model can clearly present the importance of sectoral characteristics in this issue.…”

“…The so-called Pasinettian, a representative post-Keynesian stream, has emphasized structural economic dynamics in multi-sectoral closed-economy models (Pasinetti (1981(Pasinetti ( , 1993) and open-economy models (e.g. the balance-of-payments constraint growth model (Araujo and Lima (2007); Araujo (2012); Araujo et al (2013))). An important implication of these Pasinettian approaches is that changes in the structure of production lead to changes in the rate of aggregate output growth and employment.…”

“…Consequently, their work did not focus on sectoral heterogeneity issues pertaining to income generation. More recently, Araujo andTeixeira (2011, 2012) presented a multi-sectoral version of a post-Keynesian growth model. They presented two major implications by connecting a Pasinettian model of structural change and a Kaleckian model of economic growth.…”

“…However, aggregate output growth is not the main emphasis. This is also an issue in Araujo andTeixeira (2011, 2012), who showed that each sector has a different growth regime; however, its connection with aggregate output growth is not examined. Moreover, while these studies setup disaggregated models, they do not examine how sectoral heterogeneity is concerned with aggregate output growth rate and stability.…”

Entre a lei de Thirlwall e a hipótese Prebisch-Singer: uma avaliação da dinâmica dos termos de troca em um modelo de crescimento com restrição no Balanço de Pagamentos

“…Dessa forma, este trabalho se propõe a estreitar a relação entre a Lei de Thirlwall e o pensamento cepalino, mostrando que a taxa de crescimento que equilibra o balanço de pagamentos é composta por um efeito renda -que corresponde à lei de Thirlwall -e um efeito preço -que corresponde explicitamente à hipótese Prebisch-Singer. Desde sua formulação inicial, os modelos de crescimento BOPC têm evoluído no sentido de incorporar os demais componentes do balanço de pagamentos. O exercício desenvolvido no artigo não é a primeira tentativa de incorporar a dinâmica dos preços neste referencial teórico (Dutt, 2002;Blecker, 2009;Ros, 2013;Araújo, 2013). Entretanto, nossa proposta é única ao introduzir a hipótese Prebisch-Singer a partir de uma definição alternativa da taxa de câmbio.…”