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Fiscal policy and structural transformation in developing economies

Peter Skott ()

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: Developing economies with high levels of open or hidden unemployment face structural transformation problems. Unlike in mature economies there are no structural aggregate demand problems, and sustained aggregate demand stimulus can lead to a profit squeeze in the modern sector and deindustrialization. Adaptations of functional finance to developing economies should aim to stabilize the level and composition of demand at values that are consistent with a target rate of growth of the modern sector. Populist temptations, however, may lead to deindustrialization.

Keywords: Sectoral transformation; Dutch disease; functional finance (search for similar items in EconPapers)
JEL-codes: E62 O11 O23 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-mac and nep-pke
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