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Is the natural rate of growth exogenous?

  • Miguel Leon-Ledesma

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

  • Anthony P. Thirlwall

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

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.

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File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9925/9807
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Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

Volume (Year): 53 (2000)
Issue (Month): 215 ()
Pages: 433-445

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Handle: RePEc:psl:bnlaqr:2000:43
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  4. Miguel A. León-Ledesma & A. P. Thirlwall, 1998. "The Endogeneity of the Natural Rate of Growth," Studies in Economics 9821, School of Economics, University of Kent.
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  9. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
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  11. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
  12. McCombie, J S L, 1985. "Increasing Returns and the Manufacturing Industries: Some Empirical Issues," The Manchester School of Economic & Social Studies, University of Manchester, vol. 53(1), pages 55-75, March.
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