A formal assessment of new-developmentalist theory and policy

Ariel Dvoskin () and German Feldman

Brazilian Journal of Political Economy, 2018, vol. 38, issue 3, 395-413

Abstract: We develop a formal framework that endogeneizes the productive structure of a small open peripheral economy as the outcome of a problem of technical choices. We subsequently examine the main theoretical theses and policy prescriptions of the New-Developmentalist approach to economic growth. We argue that: a) not only does the pattern of specialization depend on technical conditions, but also on income distribution; b) in an economy without rents, the level of the money wage-nominal exchange rate ratio is univocally determined once the rate of profits is known, and shows an inverse relationship with it; c) if differential rents are considered, the level of the rate of profits can be set independently of the money wage-exchange rate ratio; d) the level of the exchange rate that ensures normal profitability of the primary sector need not coincide with the current-account equilibrium rate; e) the effective exchange rate need not gravitate around any of these two former levels, which must be rather seen as minimum thresholds of the effective rate; e) the unpleasant distributive consequences of exchange-rate depreciation can be partially avoided by means of export duties that do not raise primary-commodities production costs. JEL Classification: B22; E11; F43.

Keywords: distributive conflict; Dutch Disease; exchange rate policy; newdevelopmentalism; pattern of specialization (search for similar items in EconPapers)
Date: 2018
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