Structural economic dynamics: an alternative approach to North--South models

Ricardo Araujo and Joanílio Teixeira ()

Cambridge Journal of Economics, 2004, vol. 28, issue 5, 705-717

Abstract: This paper isolates the mechanisms responsible for the difficulties facing poor regions in growing faster than rich ones. The analysis of uneven development is carried out in a framework where changes in demand composition are consistent with Engel's Law. The standpoint of the analysis is the interaction between technical progress--which produces responses in per capita income--and changes of per capita consumption. The paper focuses on one case in which preferences are homothetic and there is capital dependence, showing that the latter assumption is sufficient to explain the inequalities between poor and rich regions. When dealing with the case of non-homothetic tastes, adverse movements in the terms of trade and the international demonstration effect, which are both due to the inelastic demand for goods produced by poor regions, are the mechanisms responsible for uneven development. Copyright 2004, Oxford University Press.

Date: 2004
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