IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v44y2018icp77-87.html
   My bibliography  Save this article

Endogenizing non-price competitiveness in a BoPC growth model with capital accumulation

Author

Listed:
  • Dávila-Fernández, Marwil J.
  • Oreiro, José L.
  • Dávila Dávila, Mario W.

Abstract

On a theoretical level this article revisits Thirlwall's rule (or law) proposing a new channel through which it is possible to endogenize non-price competitiveness in the BoPC framework. We develop a model that formalizes the inverted-U relationship hypothesis that non-price competitiveness rises as countries move from a primary productive structure to light manufacturers and then decreases as richer countries get locked into antiquated industrial structures. We name it the stratification mechanism. Finally we incorporate the supply side of the economy into the structure of the model in order to avoid the so called inconsistency problem.

Suggested Citation

  • Dávila-Fernández, Marwil J. & Oreiro, José L. & Dávila Dávila, Mario W., 2018. "Endogenizing non-price competitiveness in a BoPC growth model with capital accumulation," Structural Change and Economic Dynamics, Elsevier, vol. 44(C), pages 77-87.
    • Handle: RePEc:eee:streco:v:44:y:2018:i:c:p:77-87
    DOI: 10.1016/j.strueco.2017.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X16300819
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2017.10.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas Palley, 2003. "Pitfalls in the Theory of Growth: An application to the balance of payments constrained growth model," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 75-84.
    2. João P. Romero & John S. L. McCombie, 2016. "The Multi-Sectoral Thirlwall’s Law: evidence from 14 developed European countries using product-level data," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 301-325, May.
    3. Mario Cimoli & Gabriel Porcile, 2014. "Technology, structural change and BOP-constrained growth: a structuralist toolbox," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(1), pages 215-237.
    4. 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.
    5. Alberto Bagnai & Arsène Rieber & Thi Anh-Dao Tran, 2016. "Sub-Saharan Africa’s growth, South–South trade and the generalised balance-of-payments constraint," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(3), pages 797-820.
    6. Dillon Alleyne & Alfred A. Francis, 2008. "Balance Of Payments‐Constrained Growth In Developing Countries: A Theoretical Perspective," Metroeconomica, Wiley Blackwell, vol. 59(2), pages 189-202, May.
    7. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
    8. 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.
    9. Mark Setterfield, 2012. "The Remarkable Durability of Thirlwall’s Law," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 3, pages 83-110, Palgrave Macmillan.
    10. Hartmann, Dominik & Guevara, Miguel R. & Jara-Figueroa, Cristian & Aristarán, Manuel & Hidalgo, César A., 2017. "Linking Economic Complexity, Institutions, and Income Inequality," World Development, Elsevier, vol. 93(C), pages 75-93.
    11. Matteo Lanzafame, 2014. "The balance of payments-constrained growth rate and the natural rate of growth: new empirical evidence," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(4), pages 817-838.
    12. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(2), pages 385-406, June.
    13. Cimoli, Mario & Lima, Gilberto Tadeu & Porcile, Gabriel, 2016. "The production structure, exchange rate preferences and the short-run—Medium-run macrodynamics," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 13-26.
    14. Hausmann, Ricardo & Hidalgo, Cesar, 2014. "The Atlas of Economic Complexity: Mapping Paths to Prosperity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262525429, December.
    15. Eva da Silva Catela & Gabriel Porcile, 2012. "Keynesian and Schumpeterian efficiency in a BOP-constrained growth model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 34(4), pages 777-802.
    16. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Distributive cycles and endogenous technical change in a BoPC growth model," Economic Modelling, Elsevier, vol. 77(C), pages 216-233.
    17. Rafael S. M. Ribeiro & John S. L. McCombie & Gilberto Tadeu Lima, 2016. "Exchange Rate, Income Distribution and Technical Change in a Balance-of-Payments Constrained Growth Model," Review of Political Economy, Taylor & Francis Journals, vol. 28(4), pages 545-565, October.
    18. Nishi, Hiroshi, 2016. "A multi-sectoral balance-of-payments-constrained growth model with sectoral heterogeneity," Structural Change and Economic Dynamics, Elsevier, vol. 39(C), pages 31-45.
    19. José Luis Oreiro, 2016. "Inconsistency and over-determination in balance-of-payments-constrained growth models: a note," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(2), pages 193-200, April.
    20. Fagerberg, Jan, 1988. "International Competitiveness: Errata," Economic Journal, Royal Economic Society, vol. 98(393), pages 1203-1203, December.
    21. Chang, Ha-Joon, 2011. "Reply to the comments on ‘Institutions and Economic Development: Theory, Policy and History’," Journal of Institutional Economics, Cambridge University Press, vol. 7(4), pages 595-613, December.
    22. Fiorillo, Fabio, 2001. "Rate of growth and sector specialisation coevolution in a Kaldorian export-led growth model," Structural Change and Economic Dynamics, Elsevier, vol. 12(1), pages 91-114, March.
    23. Setterfield, Mark, 1997. "'History versus Equilibrium' and the Theory of Economic Growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(3), pages 365-378, May.
    24. Raphael Rocha Gouvêa & Gilberto Tadeu Lima, 2013. "Balance‐of‐payments‐constrained growth in a multisectoral framework," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 40(2), pages 240-254, May.
    25. Chang, Ha-Joon, 2011. "Institutions and economic development: theory, policy and history," Journal of Institutional Economics, Cambridge University Press, vol. 7(4), pages 473-498, December.
    26. Arslan Razmi, 2016. "Correctly analysing the balance-of-payments constraint on growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(6), pages 1581-1608.
    27. Romano, Livio & Traù, Fabrizio, 2017. "The nature of industrial development and the speed of structural change," Structural Change and Economic Dynamics, Elsevier, vol. 42(C), pages 26-37.
    28. Fagerberg, Jan, 1988. "International Competitiveness," Economic Journal, Royal Economic Society, vol. 98(391), pages 355-374, June.
    29. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
    30. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
    31. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2007. "A structural economic dynamics approach to balance-of-payments-constrained growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 31(5), pages 755-774, September.
    32. 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.
    33. J.S.L. McCombie & Mark Roberts, 2002. "The Role of the Balance of Payments in Economic Growth," Chapters, in: Mark Setterfield (ed.), The Economics of Demand-Led Growth, chapter 6, Edward Elgar Publishing.
    34. A. P. Thirlwall, 1997. "Reflections on the Concept of Balance-Of-Payments–Constrained Growth," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 377-385, March.
    35. Nelson H. Barbosa-Filho, 2001. "The balance-of-payments constraint:from balanced trade to sustainable debt," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 381-400.
    36. Meliciani, Valentina, 2002. "The impact of technological specialisation on national performance in a balance-of-payments-constrained growth model," Structural Change and Economic Dynamics, Elsevier, vol. 13(1), pages 101-118, March.
    37. 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.
    38. Servaas Storm & C.W.M. Naastepad, 2015. "Crisis and Recovery in the German Economy: The Real Lessons," Working Papers Series 10, Institute for New Economic Thinking.
    39. Juan Carlos Moreno‐Brid, 2003. "Capital Flows, Interest Payments and the Balance‐of‐Payments Constrained Growth Model: A Theoretical and Empirical Analysis," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 346-365, May.
    40. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
    41. Alberto Bagnai, 2010. "Structural changes, cointegration and the empirics of Thirlwall's law," Applied Economics, Taylor & Francis Journals, vol. 42(10), pages 1315-1329.
    42. Neto, Antonio Soares Martins & Porcile, Gabriel, 2017. "Destabilizing austerity: Fiscal policy in a BOP-dominated macrodynamics," Structural Change and Economic Dynamics, Elsevier, vol. 43(C), pages 39-50, December.
    43. Storm, Servaas & Naastepad, C.W.M., 2015. "Crisis and recovery in the German economy: The real lessons," Structural Change and Economic Dynamics, Elsevier, vol. 32(C), pages 11-24.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas H. W. Ziesemer, 2023. "Semi-endogenous growth in a non-Walrasian DSEM for Brazil: estimation and simulation of changes in foreign income, human capital, R&D, and terms of trade," Economic Change and Restructuring, Springer, vol. 56(2), pages 1147-1183, April.
    2. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Distributive cycles and endogenous technical change in a BoPC growth model," Economic Modelling, Elsevier, vol. 77(C), pages 216-233.
    3. Dávila-Fernández, Marwil J. & Sordi, Serena, 2020. "Structural change in a growing open economy: Attitudes and institutions in Latin America and Asia," Economic Modelling, Elsevier, vol. 91(C), pages 358-385.
    4. Marwil J. Dávila-Fernández, 2018. "Alternative Approaches to Technological Change when Growth is BoPC," Department of Economics University of Siena 795, Department of Economics, University of Siena.
    5. Dávila-Fernández, Marwil J. & Sordi, Serena, 2020. "Attitudes towards climate policies in a macrodynamic model of the economy," Ecological Economics, Elsevier, vol. 169(C).
    6. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Path dependence, distributive cycles and export capacity in a BoPC growth model," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 258-272.
    7. Valeriy V. Mironov & Liudmila D. Konovalova, 2019. "Structural changes and economic growth in the world economy and Russia," Russian Journal of Economics, ARPHA Platform, vol. 5(1), pages 1-26, April.
    8. Marwil J. Dávila-Fernández & Serena Sordi, 2019. "From open economies to attitudes towards change. Growth and institutions in Latin America and Asia," Department of Economics University of Siena 809, Department of Economics, University of Siena.
    9. Marwil J. Dávila-Fernández, 2020. "Alternative approaches to technological change in a small open economy," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 279-317, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marwil J. Dávila-Fernández & Serena Sordi, 2019. "From open economies to attitudes towards change. Growth and institutions in Latin America and Asia," Department of Economics University of Siena 809, Department of Economics, University of Siena.
    2. Dávila-Fernández, Marwil J. & Sordi, Serena, 2020. "Structural change in a growing open economy: Attitudes and institutions in Latin America and Asia," Economic Modelling, Elsevier, vol. 91(C), pages 358-385.
    3. Valeriy V. Mironov & Liudmila D. Konovalova, 2019. "Structural changes and economic growth in the world economy and Russia," Russian Journal of Economics, ARPHA Platform, vol. 5(1), pages 1-26, April.
    4. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Path dependence, distributive cycles and export capacity in a BoPC growth model," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 258-272.
    5. Marwil J. Dávila-Fernández & José L. Oreiro & Mario W. D. Dávila, 2018. "Endogenizing Non-Price Competitiveness In A Model With Capital Accumulation And Bopc On Growth," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 83, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Marwil J. Dávila-Fernández & Serena Sordi, 2021. "Thirlwall's law: Binding-constraint or centre-of-gravity? A possible Kaleckian solution," Department of Economics University of Siena 853, Department of Economics, University of Siena.
    7. Robert A. Blecker, 2022. "New advances and controversies in the framework of balance‐of‐payments‐constrained growth," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 429-467, April.
    8. Guilherme R. Magacho & John S. L. McCombie, 2020. "Structural change and cumulative causation: A Kaldorian approach," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 633-660, July.
    9. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Distributive cycles and endogenous technical change in a BoPC growth model," Economic Modelling, Elsevier, vol. 77(C), pages 216-233.
    10. Jose Luis da Costa Oreiro & Stefan Wilson d'Amato & Luciano Luiz Manarin D'Agostini & Paulo Sergio de Oliveira Simoes Gala, 2022. "Measuring the technological backwardness of middle-and low-income countries: The employment quality gap and its relationship with the per capita income gap," PSL Quarterly Review, Economia civile, vol. 75(301), pages 139-159.
    11. 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.
    12. Marwil J. Dávila-Fernández, 2020. "Alternative approaches to technological change in a small open economy," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 279-317, April.
    13. Garcimartin, Carlos & Kvedaras, Virmantas & Rivas, Luis, 2016. "Business cycles in a balance-of-payments constrained growth framework," Economic Modelling, Elsevier, vol. 57(C), pages 120-132.
    14. Marwil J. Dávila-Fernández, 2018. "Alternative Approaches to Technological Change when Growth is BoPC," Department of Economics University of Siena 795, Department of Economics, University of Siena.
    15. Ganguly, Arpan & Spinola, Danilo, 2024. "Growth and distribution regimes under global value chains: Diversification, integration, and uneven development," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 634-649.
    16. Araujo, Ricardo Azevedo & Teixeira, Joanilio Rodolpho, 2021. "An appraisal of neo-Kaldorian theories from a structural economic dynamics perspective," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 247-255.
    17. Bölükbaşı, Halime & Civcir, Irfan, 2024. "Imported Inputs, Balance of Payments and Economic Growth: a model and a test on the case of Turkey," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 319-332.
    18. Srdelić, Leonarda & Dávila-Fernández, Marwil J., 2024. "International trade and economic growth in Croatia," Structural Change and Economic Dynamics, Elsevier, vol. 68(C), pages 240-258.
    19. Gabriel Porcile & Danilo Sartorello Spinola, 2018. "Natural, Effective and BOP-Constrained Rates of Growth: Adjustment Mechanisms and Closure Equations," PSL Quarterly Review, Economia civile, vol. 71(285), pages 139-160.
    20. Civcir, Irfan & Panshak, Yohanna & Ozdeser, Huseyin, 2021. "A multi-sectoral balance of payments constrained growth approach with intermediate imports: The case of Nigeria," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 240-250.

    More about this item

    Keywords

    Growth; Balance-of-Payments Constraint; Thirlwall's law;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:44:y:2018:i:c:p:77-87. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/525148 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.