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A Multi-Sectoral Balance-of-Payments-Constrained Growth Model with Sectoral Heterogeneity:International Competition, Productivity Dynamics, and Economic Growth

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  • Hiroshi Nishi

Abstract

This study builds a multi-sectoral balance-of-payments constrained growth model that incorporates some structural heterogeneity between sectors and countries, such as differences in labor productivity, price competition, share of exports and imports, and the quality of commodities. The model in the current paper generates more comprehensive results than Thirlwall (1979), Blecker (1998), and Araujo and Lima (2007), even though it contains their properties and reproduces their implications. Furthermore, as compared with these existing works, the current model sheds more light on the relationship between trade structure, international competition, productivity dynamics, and economic growth. It also shows an example of the fallacy of composition that there are differences between microeconomic and macroeconomic phenomena, by illustrating how changes in nominal wage, the Kaldor– Verdoorn effect, and the degree of market competition in both countries affect the economic growth of the home country.

Suggested Citation

  • Hiroshi Nishi, 2014. "A Multi-Sectoral Balance-of-Payments-Constrained Growth Model with Sectoral Heterogeneity:International Competition, Productivity Dynamics, and Economic Growth," Discussion papers e-13-005, Graduate School of Economics Project Center, Kyoto University.
  • Handle: RePEc:kue:dpaper:e-13-005
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    References listed on IDEAS

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    1. Raphael Rocha Gouvea & Gilberto Tadeu Lima, 2010. "Structural change, balance-of-payments constraint, and economic growth: evidence from the multisectoral Thirlwall's law," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 33(1), pages 169-204, October.
    2. Ricardo Azevedo Araujo & JoanÌlio Rodolpho Teixeira, 2003. "An Extension of the Structural Change Model to International Economic Relations," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 458-473, November.
    3. Fabrício Missio & Frederico G. Jayme Jr, 2011. "Structural heterogeneity, and endogeneity of elasticites on the balance-of-payments constrained growth model," Textos para Discussão Cedeplar-UFMG td425, Cedeplar, Universidade Federal de Minas Gerais.
    4. Fabrício Misso & Ricardo Araújo Azevedo & Frederico Jayme Jr, 2013. "An extended structural economic dynamics approach to balance-of-payments constrained growth: level of the real exchange rate and endogenous elasticities," Textos para Discussão Cedeplar-UFMG 499, Cedeplar, Universidade Federal de Minas Gerais.
    5. Mario Cimoli & Gabriel Porcile, 2010. "Specialization, Wage Bargaining And Technology In A Multigoods Growth Model," Metroeconomica, Wiley Blackwell, vol. 61(1), pages 219-238, February.
    6. Araujo, Ricardo Azevedo, 2013. "Cumulative causation in a structural economic dynamic approach to economic growth and uneven development," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 130-140.
    7. 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.
    8. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-393, December.
    9. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November.
    10. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2007. "A structural economic dynamics approach to balance-of-payments-constrained growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(5), pages 755-774, September.
    11. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    12. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    13. Kevin Nell, 2003. "A 'Generalised' Version of the Balance-of-Payments Growth Model: An application to neighbouring regions," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(3), pages 249-267.
    14. Robert A. Blecker, 1998. "International Competitiveness, Relative Wages, and the Balance-Of-Payments Constraint," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 20(4), pages 495-526, July.
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    More about this item

    Keywords

    Multi-sectoral Thirlwall’s law; International competition; Structural heterogeneity;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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