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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

    as
    1. 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.
    2. Fabrício José Missio & Frederico G. Jayme, 2012. "Structural Heterogeneity and Endogeneity of Elasticities on the Balance of Payments Constrained Growth Model," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 9, pages 239-267, Palgrave Macmillan.
    3. 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.
    4. Ricardo Azevedo Araujo & Joanílio Rodolpho Teixeira, 2003. "An Extension of the Structural Change Model to International Economic Relations," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 458-473, November.
    5. 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.
    6. Mark Setterfield (ed.), 2002. "The Economics of Demand-Led Growth," Books, Edward Elgar Publishing, number 1864.
    7. 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.
    8. 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.
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    10. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 14(4), pages 375-393, December.
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    13. Anthony Philip Thirlwall, 2012. "Balance of Payments Constrained Growth Models: History and Overview," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 1, pages 11-49, Palgrave Macmillan.
    14. 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.
    15. 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.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Multi-sectoral Thirlwall’s law; International competition; Structural heterogeneity;
    All these keywords.

    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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