Growth Regimes and Uneven Development in Open Economies: Demand and Distribution Regimes in the context of Global Value Chains

This paper aims at theoretically and empirically analysing the interactions between demand and supply in the context of the Global Value Chains (GVC). First, we develop a theoretical framework, inspired by the recent Structuralist and Post-Keynesian literature, to establish the demand and distribution regimes in the scenario of globalized production chains. We define (1) a demand regime from the balance of payments constrained literature (Blecker & Setterfield, 2019), focusing on trade, investment, and a country's position in the GVC. (2) A distribution/supply regime, defined in terms of employment, value-added, and costs. From the theoretical framework, we select proxies to characterize each of the two regimes. Inspired by the approach used by Braunstein et al. (2020), we then use Principal Component Analysis (PCA) to summarize the regimes. The PCA allows us to identify patterns of growth and distribution for distinct countries and regions, classifying them in a four-fold typology. The dataset consists of 38 countries, and the data sources come from the World Development Indicators (WDI), World Input Output Database (WIOD), Trade in Value Added (TiVA), and the Penn World Tables (PWT). On one hand, this paper contributes to structuralist growth models that typically estimate demand and distribution regimes independently, thereby offering a unified narrative on regimes of economic growth in the context of GVC. On the other hand, the four-fold typology depicts how growth dynamics differ distinctly by geographical regions and how globalization has retained and accelerated processes of uneven development globally.