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Is the natural rate of growth exogenous?

Author

Listed:
  • Miguel Leon-Ledesma

    (University of Kent at Canterbury, Canterbury(Great Britain))

  • Anthony P. Thirlwall

    (University of Kent at Canterbury, Canterbury(Great Britain))

Abstract

In mainstream growth theory, including endogenous growth theory, the naturalrate of growth as defined by Harrod, is still treated as exogenous. In practice, however, both the growth of the labour force and the growth of labour productivity are endogenous to demand. This has theoretical implications for the adjustment process between the actual, warranted and natural growth rates. It also has serious implications for the way in which the growth process is viewed: whether from the supply side or demand side. It is shown for a sample of 15 OECD countries 1961-1995 that the natural rate of growth has been very responsive to the actual growth rate, and it is argued that for most countries demand constraints operate long before supply capacity is reached.

Suggested Citation

  • Miguel Leon-Ledesma & Anthony P. Thirlwall, 2000. "Is the natural rate of growth exogenous?," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 53(215), pages 433-445.
  • Handle: RePEc:psl:bnlaqr:2000:43
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9925/9807
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    References listed on IDEAS

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    3. Miguel A. LeÛn-Ledesma & A. P. Thirlwall, 2002. "The endogeneity of the natural rate of growth," Cambridge Journal of Economics, Oxford University Press, vol. 26(4), pages 441-459, July.
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    Citations

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    Cited by:

    1. Stephanie Seguino & Mark Setterfield, 2010. "Gender Equality and the Sustainability of Steady State Growth Paths," Chapters,in: Handbook of Alternative Theories of Economic Growth, chapter 18 Edward Elgar Publishing.
    2. Heinz-Peter Spahn, 2001. "On the theory of interest rate policy," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 355-380.
    3. Matteo Lanzafame, 2010. "The endogeneity of the natural rate of growth in the regions of Italy," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(5), pages 533-552.
    4. Setterfield, Mark & Gouri Suresh, Shyam, 2016. "Multi-agent systems as a tool for analyzing path-dependent macrodynamics," Structural Change and Economic Dynamics, Elsevier, vol. 38(C), pages 25-37.
    5. Soumya Datta, 2016. "Macrodynamics of debt-financed investment-led growth with interest rate rules," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(4), pages 593-624, October.
    6. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    7. Kevin S. Nell & A.P. Thirlwall, 2017. "Why does the productivity of investment vary across countries?," PSL Quarterly Review, Economia civile, vol. 70(282), pages 213-245.
    8. Miguel A. León-Ledesma & Matteo Lanzafame, 2010. "The Endogenous Nature of the ‘Natural’ Rate of Growth," Chapters,in: Handbook of Alternative Theories of Economic Growth, chapter 10 Edward Elgar Publishing.
    9. Nelson H. Barbosa Filho, 2004. "A Simple Model Of Demand-Led Growth And Income Distribution," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 038, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    10. Gabriel Porcile & Gilberto Tadeu Lima, 2010. "Real exchange rate and elasticity of labour supply in a balance-of-payments-constrained macrodynamics," Cambridge Journal of Economics, Oxford University Press, vol. 34(6), pages 1019-1039.
    11. repec:psl:moneta:2017:31 is not listed on IDEAS
    12. Luciano Boggio & Gilberto Seravalli, 2002. "Is the natural rate of growth exogenous?A comment," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(221), pages 219-227.
    13. Datta, Soumya, 2013. "Convergence, cycles and complex dynamics of financing investment," MPRA Paper 52111, University Library of Munich, Germany, revised 10 Dec 2013.
    14. Molerés-Regalado, Estefanía. & Perrotini-Hernández, Ignacio., 2013. "On Harrod’s Natural Rate of Growth and the Role of Demand: an Empirical Assessment," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(16), pages 29-49, primer se.
    15. Fortuno-Hernández, Josefa Carolina. & Landa-Díaz, Heri Óscar., 2014. "Gasto público, inversión y crecimiento en México , 1980-2014," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(19), pages 33-52, segundo s.

    More about this item

    Keywords

    Growth; Productivity;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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