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International competitiveness in post-Keynesian growth theory: controversies and empirical evidence

Author

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  • Luciano Boggio
  • Laura Barbieri

Abstract

A fundamental starting point for post-Keynesian theory concerning growth in open economies is succinctly expressed in the following statement by Kaldor: ‘[T]he main autonomous factor governing both the level and the rate of growth of effective demand of an industrial country…is the external demand for its exports: and the main factor governing the latter is international competitiveness, which in turn depends on the level of its industrial cost relatively to other industrial exporters’ (Kaldor, 1971, p. 7; italics added). Moreover, thanks to increasing returns in manufacturing, export expansion and international competitiveness would interact so as to create vicious or virtuous circles of cumulative causation. A few years later Kaldor, having found a positive correlation between the time changes of the main industrial countries’ relative manufacturing export shares and that of their relative unit costs—a correlation that became known as the ‘Kaldor paradox’—dismissed his original cumulative causation theory and adopted a version close to Harrod’s ‘foreign trade multiplier’. The purpose of this paper is to reaffirm the Kaldorian cumulative causation theory in its original version, by providing a firmer analytical basis and showing that, contrary to the ‘Kaldor paradox’, time changes in export performance must be ‘explained’ by levels rather than by changes in unit costs.

Suggested Citation

  • Luciano Boggio & Laura Barbieri, 2017. "International competitiveness in post-Keynesian growth theory: controversies and empirical evidence," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(1), pages 25-47.
  • Handle: RePEc:oup:cambje:v:41:y:2017:i:1:p:25-47.
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    File URL: http://hdl.handle.net/10.1093/cje/bev067
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    Cited by:

    1. Kalaitzi Athanasia Stylianou & Kherfi Samer & Alrousan Sahel & Katsaiti Marina-Selini, 2022. "Are Non-Primary Exports the Source for Further Economic Growth in the UAE?," Review of Middle East Economics and Finance, De Gruyter, vol. 18(1), pages 29-51, April.
    2. Athanasia S. Kalaitzi, 2018. "The Causal Effects of Trade and Technology Transfer on Human Capital and Economic Growth in the United Arab Emirates," Sustainability, MDPI, vol. 10(5), pages 1-15, May.
    3. Sascha Keil & Walter Paternesi Meloni, 2024. "Kaldorian cumulative causation in the Euro area: an empirical assessment of divergent export competitiveness," Chemnitz Economic Papers 063, Department of Economics, Chemnitz University of Technology.
    4. Luìs, Galindo & Giulio, Guarini & Gabriel, Porcile, 2020. "Environmental innovations, income distribution, international competitiveness and environmental policies: a Kaleckian growth model with a balance of payments constraint," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 16-25.
    5. Dávila-Fernández, Marwil & Oreiro, José, 2021. "A song of ice and fire: Competitiveness in an export-led growing economy," MPRA Paper 109821, University Library of Munich, Germany.
    6. Porcile, Gabriel & Sartorello Spinola, Danilo & Yajima, Giuliano, 2020. "Patterns of growth in structuralist models: The role of the real exchange rate and industrial policy," MERIT Working Papers 2020-027, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Missio, Fabricio & Araujo, Ricardo Azevedo & Jayme, Frederico G., 2017. "Endogenous elasticities and the impact of the real exchange rate on structural economic dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 42(C), pages 67-75.
    8. Athanasia S. Kalaitzi & Emmanuel Cleeve, 2018. "Export-led growth in the UAE: multivariate causality between primary exports, manufactured exports and economic growth," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(3), pages 341-365, September.
    9. Musa Esuwa Shingil & Huseyin Ozdeser & Andisheh Saliminezhad, 2022. "Investigation of Balance of Payment Constrained Growth Model: The Impact of Export Growth, Capital Flows, and Real Effective Exchange Rate on Growth of the UK," SAGE Open, , vol. 12(2), pages 21582440221, May.
    10. 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.
    11. Marcos A. L. de Campos & Jose Luis Oreiro & Kalinka Martins da Silva, 2024. "The impact of trade liberalisation and exchange rate undervaluation on exports, imports, and trade balance of Latin American countries (1970-2019)," Working Papers PKWP2408, Post Keynesian Economics Society (PKES).
    12. Heinze, Henriette, 2018. "The determinants of German exports: An analysis of intra- and extra-EMU trade," IPE Working Papers 95/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    13. Porcile, Gabriel & Spinola, Danilo & Yajima, Giuliano, 2021. "Patterns of Growth in Structuralist Models: The Role of PoliticalEconomy," CAFE Working Papers 12, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    14. Walter Paternesi Meloni, 2021. "The price vs. non-price competitiveness conundrum: a post-Keynesian comparative political economy analysis," Working Papers PKWP2109, Post Keynesian Economics Society (PKES).
    15. Sascha Keil, 2021. "The Challenging Estimation Of Trade Elasticities:Tackling The Inconclusive Eurozone Evidence," Chemnitz Economic Papers 042, Department of Economics, Chemnitz University of Technology, revised May 2021.

    More about this item

    Keywords

    International competitiveness; Post-Keynesian growth theory; Kaldor paradox; replicator equation;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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