Positivistic models of long-run labor allocation dynamics

Denis Stijepic

doi:10.1186/s40008-017-0078-7

Abstract

The three-sector framework (relating to agriculture, manufacturing, and services) is one of the major concepts for studying the long-run dynamics of the economic structure. We summarize the empirical/theoretical literature consensus by formulating ‘economic laws’ of long-run structural change in the three-sector framework. Based on these laws, we derive the (qualitative/geometrical) properties of the dynamic system describing the structural change and apply the standard concepts/theorems of dynamic systems analysis (e.g., omega limit sets) to derive the implications of these laws for the future (transitional and limit) structural dynamics in developed and developing countries. The advantage of this system theoretical approach is that it minimizes the dependence of the predictions on theoretical/ideological arguments, which are often criticized in economics.

Highlights

A great part of long-run economic dynamics literature seeks to identify regularities in empirical data and construct theoretical/intuitive explanations of these regularities
If economic models generally predict that an observed regularity is persistent across time and across countries, we state that this regularity is an economic law
5.1 Discussion of the method Standard quantitative approaches for prediction of economic dynamics rely heavily on: (a) theoretical information, which is ideological in great part, as in the case of predictions based on theoretical models; (b) complex quantitative empirical relationships, which are difficult to interpret intuitively, as in the case of, e.g., vector auto-regressions or nonlinear regressions; (c) oversimplifying estimation equations, which are ideological, yet often loosely related to theoretical arguments, as in the case of linear regression; or (d) in general, quantitative statements that are often restricted in validity to relatively small country groups

Summary

Introduction

A great part of long-run economic dynamics literature seeks to identify regularities (e.g., dynamic patterns) in empirical data and construct theoretical/intuitive explanations of these regularities. An economic model is regarded as an explanation of an empirical regularity if the model can reproduce the observed regularity under reasonable parameter restrictions. If economic models generally predict that an observed regularity is persistent across time and across countries (under reasonable parameter settings), we state that this regularity is an economic law.. Since economic laws are statements (about the properties of economic variables), we can combine different laws and use logical operations to derive their direct implications. These implications can be regarded as predictions of economic dynamics based on Stijepic Economic Structures (2017) 6:19 relatively general and widely accepted economic laws.. These implications can be regarded as predictions of economic dynamics based on Stijepic Economic Structures (2017) 6:19 relatively general and widely accepted economic laws. As we will see in our paper, we can go much further: Since the laws are statements about the dynamic properties of variables, which can be translated into geometrical/topological properties of development paths, we can use the geometrical/topological concepts and theorems of mathematical dynamic systems analysis to derive predictions of dynamics on the basis of these laws

Objectives

Findings

Conclusion