Luigi Pasinetti's Discussions on Technical Progress and International Economic Relations: A View from Development Economics

This work aims to show that Pasinetti's treatment of international economic relations, together with his dynamics of structural change with vertically integrated sectors, provides useful insights into the theories of economic development. We focus on two key debates. The first is the unbalanced vs. balanced growth debate. Discussing what economic sectors a country should promote to launch economic development has been an important issue in economic development and economic planning theories. Pasinetti's explanation, in terms of the effective demand condition and the structural dynamics that it implies, means that an underdeveloped country must invest in those sectors with expanding demand or in goods already produced. We show that unbalanced growth theory, both analytically and conceptually, is more in line with Pasinetti's approach. The second debate concerns the dispute on the deterioration of the terms of trade, initiated by Raúl Prebisch and Hans Singer, who highlighted the unequal distribution of the benefits of technical progress between central and peripheral countries. Pasinetti, while acknowledging Prebisch's work, proposed a different, more comprehensive. Our analysis reveals that Pasinetti's purely logical model, which examines structural change in a pre-institutional scheme, leads to the same conclusions as Prebisch's but with a different theoretical underpinning.