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Real Exchange Rate And Elasticity Of Labor Supply In A Balance-Of-Payments-Constrained Macrodynamics

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  • Gabriel Porcile
  • Gilberto Tadeu Lima

Abstract

A macrodynamic model is proposed in which the real exchange rate and the elasticity of labour supply interact defining different trajectories of growth and income distribution in a developing economy. Growth depends on imports of capital goods which are paid with exports (there are no capital flows) and hence is constrained by equilibrium in current account. The role of the elasticity of labour supply is to prevent the real exchange rate from appreciating as the economy grows, thereby sustaining international competitiveness. The model allows for endogenous technological change and considers the impact of migration from the subsistence to the modern sector on the cumulative (Kaldor-Verdoorn) process of learning. Copyright The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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Bibliographic Info

Paper provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its series Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] with number 11.

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Date of creation: 2006
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Handle: RePEc:anp:en2006:11

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References

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  1. Miguel Leon-Ledesma & Anthony P. Thirlwall, 2000. "Is the natural rate of growth exogenous?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 433-445.
  2. Juan Carlos Moreno-Brid & Esteban Pérez, 1999. "Balance-of-Payments-Constrained Growth in Central America: 1950-96," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 22(1), pages 131-147, October.
  3. Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," International Finance 9707001, EconWPA.
  4. Hinkle, Lawrence E. & Monteil, Peter J. (ed.), 1999. "Exchange Rate Misalignment: Concepts and Measurement for Developing Countries," OUP Catalogue, Oxford University Press, number 9780195211269.
  5. Anthony Philip Thirlwall, 1979. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
  6. Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," NBER Working Papers 6174, National Bureau of Economic Research, Inc.
  7. Miguel A. León-Ledesma & A. P. Thirlwall, 1998. "The Endogeneity of the Natural Rate of Growth," Studies in Economics 9821, Department of Economics, University of Kent.
  8. Mario Cimoli & Nelson Correa, 2002. "Trade Openess and Technological Gaps in Latin America: a Low Growth Trap," LEM Papers Series 2002/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  9. Ricardo Hausmann & Lant Pritchett & Dani Rodrik, 2005. "Growth Accelerations," Journal of Economic Growth, Springer, vol. 10(4), pages 303-329, December.
  10. Paul Krugman, 1988. "Differences In Income Elasticities and Trends in Real Exchange Rates," NBER Working Papers 2761, National Bureau of Economic Research, Inc.
  11. Dani Rodrik, 1993. "Taking Trade Policy Seriously: Export Subsidization as a Case Study in Policy Effectiveness," NBER Working Papers 4567, National Bureau of Economic Research, Inc.
  12. Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 13(3), pages 395-412, September.
  13. Robert A. Blecker, 1998. "International Competitiveness, Relative Wages, and the Balance-of-Payments Constraint," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 20(4), pages 495-526, July.
  14. Pugno, Maurizio, 1996. "A Kaldorian model of economic growth with labour shortage and major technical changes," Structural Change and Economic Dynamics, Elsevier, vol. 7(4), pages 429-449, December.
  15. Roberto Frenkel & Lance Taylor, 2006. "Real Exchange Rate, Monetary Policy and Employment," Working Papers 19, United Nations, Department of Economics and Social Affairs.
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Citations

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Cited by:
  1. Mark Setterfield, 2013. "Exploring the supply side of Kaldorian growth models," Review of Keynesian Economics, Edward Elgar, vol. 1(1), pages 22-36, January.
  2. Lima, Gilberto Tadeu & Porcile, Gabriel, 2011. "Economic growth and income distribution with heterogeneous preferences on the real exchange rate," MPRA Paper 32356, University Library of Munich, Germany.
  3. Martín Rapetti, 2013. "The Real Exchange Rate and Economic Growth: Some Observations on the Possible Channels," UMASS Amherst Economics Working Papers 2013-11, University of Massachusetts Amherst, Department of Economics.
  4. Razmi, Arslan & Rapetti, Martin & Skott, Peter, 2012. "The real exchange rate and economic development," Structural Change and Economic Dynamics, Elsevier, vol. 23(2), pages 151-169.
  5. Martin Rapetti & Peter Skott & Arslan Razmi, 2011. "The Real Exchange Rate and Economic Growth: are Developing Countries Different?," UMASS Amherst Economics Working Papers 2011-07, University of Massachusetts Amherst, Department of Economics.
  6. Arslan Razmi, 2013. "Correctly Analyzing the Balance of Payments Constraint on Growth," UMASS Amherst Economics Working Papers 2013-12, University of Massachusetts Amherst, Department of Economics.
  7. Bonatti, Luigi & Fracasso, Andrea, 2013. "Regime switches in the Sino-American co-dependency: Growth and structural change in China," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 1-32.
  8. Mario Cimoli & Gabriel Porcile, 2011. "Technology, structural change and BOP constrained growth: a structuralist toolbox," Working Papers 0120, Universidade Federal do Paraná, Department of Economics.
  9. Peter Skott & Martin Rapetti & Arslan Razmi, 2012. "Real exchange rates and the long-run effects of aggregate demand in economies with underemployment," UMASS Amherst Economics Working Papers 2012-06, University of Massachusetts Amherst, Department of Economics.
  10. Porcile, Gabriel & de Souza, Alexandre Gomes & Viana, Ricardo, 2011. "External debt sustainability and policy rules in a small globalized economy," Structural Change and Economic Dynamics, Elsevier, vol. 22(3), pages 269-276, September.
  11. Araujo, Ricardo Azevedo, 2011. "New insights from a structural economic dynamic approach to balance of payments constrained growth," MPRA Paper 30332, University Library of Munich, Germany.

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