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Cambridge Journal of Economics Advance Access originally published online on May 15, 2007
Cambridge Journal of Economics 2007 31(5):755-774; doi:10.1093/cje/bem006
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© The Author 2007. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

A structural economic dynamics approach to balance-of-payments-constrained growth

Ricardo Azevedo Araujo and Gilberto Tadeu Lima*

* Catholic University of Brasília; and University of São Paulo, respectively

Addresses for correspondence: Ricardo Azevedo Araujo; email: rsaaraujo{at}pos.ucb.br; Gilberto Tadeu Lima; email: giltadeu{at}usp.br

This paper derives a balance-of-payments equilibrium growth rate analogous to Thirlwall's Law from a Pasinettian multi-sector macrodynamic framework. The resulting formula, which we call the Multi-Sectoral Thirlwall's Law, asserts that a country's growth rate of per capita income is directly proportional to the growth rate of its exports, with such a proportionality being inversely (directly) related to sectoral income elasticities of demand for imports (exports). These income elasticities are weighted by coefficients that measure the share of each sector in total imports and exports, respectively. It is shown that several theoretical, empirical and policy implications can be drawn from such a structural economic dynamics approach to balance-of-payments-constrained growth.

Key Words: Structural economic dynamics • Foreign trade multiplier • Balance-of-payments-constrained growth • Uneven development

JEL classifications: O19, F12

Manuscript received May 8, 2006; final version received February 14, 2007.


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