Structural Change and Economic Growth: Production in the Short Run — A generalisation in terms of vertically hyper-integrated sectors

Pasinetti’s (1981) Structural Change and Economic Growth provides a complete and far reaching theoretical framework for the study of structural change, and therefore of economic development, rooted in in the Classical-Sraffian tradition. Some attempts have been made, both in the ’80s — for instance Siniscalco (1982) and Momigliano & Siniscalco (1986) — and more recently — e.g. Montresor & Vittucci Marzetti (2007a) and Montresor & Vittucci Marzetti (2008) — to use this framework for empirical purposes. However, all these attempts are based on Pasinetti’s (1973) paper, i.e. on vertically integrated analysis. It is my contention that, as a consequence, they failed to recognise, and therefore to take advantage of, the main analytical feature of the 1981 book, namely vertical hyper-integration. Actually, when trying to overcome the simplifying assumptions made by Pasinetti (1981) as regards the description of the technique, the starting point should be Pasinetti (1988), and not Pasinetti (1973), the latter being an intermediate step leading to the former. The aim of the present paper is therefore, first of all, that of highlighting the key differences between Pasinetti (1973) and Pasinetti (1988), in order to show Pasinetti’s (1981) vertically hyper-integrated character. In the second place, the whole analytical framework provided by Pasinetti (1981) will be generalised by reintroducing inter-industry relations and allowing for more complex dynamics of economic magnitudes. This conceptual clarification and analytical generalisation is intended to be the first step of a line of research aiming at using, and extending, the present framework to perform empirical analyses and study the behaviour of actual economic systems.