Working Paper #2020-003
Uneven development and the balance of payments constrained model: Terms of trade, economic cycles, and productivity catching-up
This paper expands the Dutt (2002) version of the Balance of Payments
Constrained Model (BPCM). We question the assumption of price-neutrality
and the incompatibility between the BPCM and the Prebisch-Singer
hypothesis (PSH) in terms of the long-run terms-of-trade dynamics. The
research focuses on three main elements: (1) the long-run behaviour of
the terms of trade in a Structuralist framework. (2) The cyclical
endogenous dynamics in the relationship between economic activity and
income distribution à la Goodwin. (3) Productivity gap and catching-up.
This article adds to the Dutt(2002) model (a) a productivity gap
dynamics in which the south has a catching-up element; (b) labour market
by including a Phillips Curve for the relationship between employment
rate and economic activity; (c) labour supply dynamics that considers
the labour transfer issue between traditional and modern sectors. We
find that the Structuralist/evolutionary arguments hold in the BPCM
framework with these changes.
- Keywords
-
- Balance of Payments constrains
- Terms of Trade
- Economic Cycles
- Latin American Structuralism
- JEL codes
-
- E22
- E32
- O41
Cite this as
APA 7th ed.Spinola, D. (2020). Uneven development and the balance of payments constrained model: Terms of trade, economic cycles, and productivity catching-up (UNU-MERIT Working Paper No. 2020-003). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=8435