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Cambridge Journal of Economics 2004 28(5):705-717; doi:10.1093/cje/beh031
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Cambridge Journal of Economics, Vol. 28, No. 5, © Cambridge Political Economy Society 2004; all rights reserved

Structural economic dynamics: an alternative approach to North–South models

Ricardo Azevedo Araujo and Joanílio Rodolpho Teixeira*

Address for correspondence: J. Teixeira, Department of Economics, University of Brasilia. ICC Norte, 70910-900. Brasília, Brazil; email: rsaaraujo{at}aol.com or joanilioteixeira{at}hotmail.com

This paper isolates the mechanisms responsible for the difficulties facing poor regions in growing faster than rich ones. The analysis of uneven development is carried out in a framework where changes in demand composition are consistent with Engel's Law. The standpoint of the analysis is the interaction between technical progress—which produces responses in per capita income—and changes of per capita consumption. The paper focuses on one case in which preferences are homothetic and there is capital dependence, showing that the latter assumption is sufficient to explain the inequalities between poor and rich regions. When dealing with the case of non-homothetic tastes, adverse movements in the terms of trade and the international demonstration effect, which are both due to the inelastic demand for goods produced by poor regions, are the mechanisms responsible for uneven development.

Key Words: Uneven development • Capital dependence • Engel's Law

JEL classifications: O19, F12

Manuscript received September 18, 2001; final version received October 7, 2002.


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