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A vertically integrated approach to increasing returns and cumulative causation

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  • Araujo, Ricardo Azevedo
  • Santini, Theo
  • de Acypreste, Rafael

Abstract

Focusing on the interindustry aspect of the structural economic dynamics (SED) to yield a non-autarchic perspective on the vertically integrated sectors (VIS), we go a step further in establishing productivity growth at the industry level being transmitted via inter and intra-sectoral pecuniary spillovers. To accomplish this task, we deal with the technical aspects of shifting from inter-industry to vertically integrated analysis. Besides, dimensions of the Kaldor-Verdoorn (KV) law are selectively embedded in Pasinetti's multisectoral model, thus rendering technical change endogenous. With this approach, we take into account both external and internal economies of scale, allowing us to formally reconcile the KV and Smith-Young (SY) views on cumulative causation and increasing returns. We highlight that the interdependent nature of the VIS impacts the capability of spreading pecuniary externalities throughout the economy.

Suggested Citation

  • Araujo, Ricardo Azevedo & Santini, Theo & de Acypreste, Rafael, 2023. "A vertically integrated approach to increasing returns and cumulative causation," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 49-58.
    • Handle: RePEc:eee:streco:v:65:y:2023:i:c:p:49-58
    DOI: 10.1016/j.strueco.2023.02.005
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    More about this item

    Keywords

    Cumulative Causation; Vertical integration; Pecuniary externalities;
    All these keywords.

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
    • B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian

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