A neo-Kaldorian approach to structural economic dynamics

Abstract

Although the structural economic dynamic approach provides a simultaneous consideration of demand and supply sides of economic growth, it does not fully take into account the possible role played by demand in the generation of technical progress. From a neo-Kaldorian perspective, this paper seeks to establish the concepts of demand and productivity regimes in an open version of the pure labour Pasinettian model. In order to derive the demand regime, a disaggregated version of the static Harrod foreign multiplier is derived, while the productivity regime is built in terms of disaggregated Kaldor–Verdoorn laws. The upshot is a multi-sectoral growth model of structural change and cumulative causation, in which an open version of the Pasinettian model to foreign trade may be obtained as a particular case. Furthermore, we show that the evolution of demand patterns, while being affected by differential rates of productivity growth in different sectors of the economy, also play an important role in establishing the pace of technical progress.