A Multi-Sectoral Balance-of-Payments-Constrained Growth Model with Sectoral Heterogeneity:International Competition, Productivity Dynamics, and Economic Growth

Hiroshi Nishi

Discussion papers from Graduate School of Economics Project Center, Kyoto University

Abstract: This study builds a multi-sectoral balance-of-payments constrained growth model that incorporates some structural heterogeneity between sectors and countries, such as differences in labor productivity, price competition, share of exports and imports, and the quality of commodities. The model in the current paper generates more comprehensive results than Thirlwall (1979), Blecker (1998), and Araujo and Lima (2007), even though it contains their properties and reproduces their implications. Furthermore, as compared with these existing works, the current model sheds more light on the relationship between trade structure, international competition, productivity dynamics, and economic growth. It also shows an example of the fallacy of composition that there are differences between microeconomic and macroeconomic phenomena, by illustrating how changes in nominal wage, the Kaldor– Verdoorn effect, and the degree of market competition in both countries affect the economic growth of the home country.

Keywords: Multi-sectoral Thirlwall’s law; International competition; Structural heterogeneity (search for similar items in EconPapers)
JEL-codes: F12 O19 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-03
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Persistent link: https://EconPapers.repec.org/RePEc:kue:dpaper:e-13-005

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