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Cambridge Journal of Economics Advance Access originally published online on July 4, 2005
Cambridge Journal of Economics 2006 30(1):7-32; doi:10.1093/cje/bei055
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© The Author 2005. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

Adaptive economic growth

J. Stan Metcalfe, John Foster and Ronnie Ramlogan*

* University of Manchester, University of Queensland and University of Manchester, respectively

Address for correspondence: Stan Metcalfe, ESRC Centre for Research on Innovation and Competition, University of Manchester, Harold Hankins Building, University Precinct Centre, Oxford Road, Manchester M13 9QH, UK; email: stan.metcalfe{at}man.ac.uk

Abstract

This paper develops an evolutionary theory of adaptive growth, understood as a product of structural change and economic self-transformation, based upon processes that are closely connected with but not reducible to the growth of knowledge. The dominant connecting theme is enterprise, the innovative variations it generates and the multiple connections between investment, innovation, demand and structural transformation in the market process. The paper explores the dependence of macroeconomic productivity growth on the diversity of technical progress functions and income elasticities of demand at the industry level, and the resolution of this diversity into patterns of economic change through market processes. It is shown how industry growth rates are constrained by higher-order processes of emergence that convert an ensemble of industry growth rates into an aggregate rate of growth. The growth of productivity, output and employment are determined mutually and endogenously, and their values depend on the variation in the primary causal influences in the system.

Key Words: Evolution and growth • Technical progress • Structural change • Increasing returns

JEL classifications: 03, 04

Manuscript received April 25, 2003; final version received April 15, 2005.


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