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Credit constraints and structure: a theoretical model of extractivism and slow-growth dynamics

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  • Leopoldo Gómez-Ramírez
  • Nestor Garza

Abstract

We develop a theoretical model that explains the relationship between credit constraints and economic growth in the context of a three-sector economy, including an “extractive” sector. The model belongs in the structuralist tradition and it is inspired by the Colombian economy. In contrast to neoclassic development economics models, we prove that: 1) relaxing the credit crunch would foster formal sector growth but it may nevertheless not imply formal employment growth; and 2) the economy can converge to a pattern where the extractive sector increases while the formal one shrinks. JEL Classification: O11; O41; E24; E26.

Suggested Citation

  • Leopoldo Gómez-Ramírez & Nestor Garza, 2021. "Credit constraints and structure: a theoretical model of extractivism and slow-growth dynamics," Brazilian Journal of Political Economy, Center of Political Economy, vol. 41(3), pages 538-554.
    • Handle: RePEc:ekm:repojs:v:41:y:2021:i:3:p:538-554:id:2212
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    File URL: https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/2212/2227
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    More about this item

    Keywords

    Credit constraints; formal employment; extractivism; Colombia; structuralist economics;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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